Abstract

http://ssrn.com/abstract=1908227
 
 

References (14)



 
 

Citations (2)



 


 



How Index Trading Increases Market Vulnerability


Rodney N Sullivan


AQR Capital Management

James X. Xiong


Ibbotson Associates

September 26, 2011

Financial Analysts Journal, Forthcoming

Abstract:     
Assets invested in passively managed equity mutual funds and exchange traded funds (ETFs) have grown steadily in recent years, reaching more than one trillion dollars at the end of 2010. Through a battery of tests, we establish that the rise in popularity of index investing contributes to higher systematic market risk. More indexed equity assets corresponds to increased cross-sectional trading commonality, in turn precipitating higher return correlations among stocks. We further discover that equity betas have not only risen but converged in recent years; also consistent with the accelerating growth and importance of passive investing.

Number of Pages in PDF File: 30

Keywords: market risk, risk management

Accepted Paper Series





Download This Paper

Date posted: August 11, 2011 ; Last revised: November 1, 2011

Suggested Citation

Sullivan, Rodney N and Xiong, James X., How Index Trading Increases Market Vulnerability (September 26, 2011). Financial Analysts Journal, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1908227

Contact Information

Rodney N Sullivan (Contact Author)
AQR Capital Management ( email )
Two Greenwich Plza
Greenwich, CT 06830
United States
HOME PAGE: http://www.aqr.com/Home.aspx
James X. Xiong
Ibbotson Associates ( email )
United States
Feedback to SSRN


Paper statistics
Abstract Views: 4,870
Downloads: 1,008
Download Rank: 11,249
References:  14
Citations:  2

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.407 seconds