ETFs Create Stock Markets That Are Both Mindless and Too Expensive, Study Says
- New study says passive stupor causes stocks to move as a group
- Growing body of research blames ETFs for reducing efficiency
Exchange-traded funds are making stock markets dumber -- and more expensive.
That’s the finding of researchers at Stanford University, Emory University and the Interdisciplinary Center of Herzliya in Israel. They’ve uncovered evidence that higher ownership of individual stocks by ETFs widens the bid-ask spreads in those shares, making them more expensive to trade and therefore less attractive.