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  • 2022
  • Working Paper

Passive Ownership and Price Informativeness

By: Marco Sammon
  • Format:Print
  • | Language:English
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Abstract

I propose three new empirical measures of price informativeness motivated by a theoretical model. I find average price informativeness declined over the past 30 years and passive ownership is negatively correlated with price informativeness. To establish causality, I show that price informativeness decreases after quasi-exogenous increases in passive ownership arising from index additions and rebalancing. The model offers two explanations for the empirical results: passive ownership decreases investors’ incentives to become informed and leads investors to re-allocate their attention from stock-specific risks to systematic risk.

Keywords

Passive Ownership; ETFs; Market Efficiency; Ownership; Price; Theory; Measurement and Metrics

Citation

Sammon, Marco. "Passive Ownership and Price Informativeness." Working Paper, February 2022.
  • SSRN
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About The Author

Marco Sammon

Finance
→More Publications

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More from the Author
  • Excess Reconstitution-Day Volume By: Alex Chinco and Marco Sammon
  • What Triggers National Stock Market Jumps? By: Scott Baker, Nicholas Bloom, Steve Davis and Marco Sammon
  • Trade Policy Uncertainty and Stock Returns By: Marcelo Bianconi, Federico Esposito and Marco Sammon
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