Passive investing boosts some risks and cuts others – Fed paper
Authors assess four ways the surge in passive investing might impact stability
The “substantial shift” from active to passive investment strategies appears to have increased some financial stability risks while cutting others, according to research published by the Federal Reserve.
The authors of the working paper examine the shift’s impact on four areas of risk: liquidity transformation and redemption risk; market volatility; increases in market concentration; and effects on the valuations, volatility and co-movement of assets included in indexes.
The growth of exchange
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