Information, Participation, and Passive Investing

110 Pages Posted: 15 Dec 2018 Last revised: 19 Jun 2023

See all articles by George Malikov

George Malikov

University of Western Ontario - Richard Ivey School of Business

Date Written: May 1, 2019


I investigate the impact of fundamental information acquisition costs on price informativeness and passive investing. Within a REE model of multiple risky assets and a redundant market index, I define passive investing as the optimal decision to: 1) free-ride on the information acquisition efforts of active traders in the index asset, and 2) forgo all stock picking strategies. Falling information costs have the dual effect of lowering the cost of market timing, decreasing passive share, and lowering the cost of stock picking, increasing passive share. If the stock picking effect dominates the market timing effect, passive share increases in tandem with greater price informativeness. I exploit SEC's eXtensible Business Reporting Language mandate as a negative shock to information costs to provide suggestive evidence that falling information costs may be contributing to the rise in passive investing.

Keywords: passive investing, passive active debate, indexing, information, asset management, XBRL

JEL Classification: G11, G12, G14, D82

Suggested Citation

Malikov, George, Information, Participation, and Passive Investing (May 1, 2019). Available at SSRN: or

George Malikov (Contact Author)

University of Western Ontario - Richard Ivey School of Business ( email )

1151 Richmond Street North
London, Ontario N6A 3K7


Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
PlumX Metrics