More than two and half years ago, I wrote an article titled Days of Being Passive-Aggressive. I was worried about the increasing influence of passive investments, or ETFs. They were created as a vehicle to own assets, however, more and more people use ETFs as a tool to trade because it's very liquid. Historically, even on a very bad day, some stocks are up and other stocks are down because as the stock price goes down, value investors will step in. Today, investors pay less attention to the valuation of companies and want to trade the markets. Exhibit 4 from the article shows the trading volume of ETFs and VIX are highly correlated. So, you can say, ETFs are creating volatility.
Another Day of Being Passive-Aggressive
Another Day of Being Passive-Aggressive
Another Day of Being Passive-Aggressive
More than two and half years ago, I wrote an article titled Days of Being Passive-Aggressive. I was worried about the increasing influence of passive investments, or ETFs. They were created as a vehicle to own assets, however, more and more people use ETFs as a tool to trade because it's very liquid. Historically, even on a very bad day, some stocks are up and other stocks are down because as the stock price goes down, value investors will step in. Today, investors pay less attention to the valuation of companies and want to trade the markets. Exhibit 4 from the article shows the trading volume of ETFs and VIX are highly correlated. So, you can say, ETFs are creating volatility.