IDEAS home Printed from https://ideas.repec.org/a/taf/ufajxx/v76y2020i4p23-39.html
   My bibliography  Save this article

The Shift from Active to Passive Investing: Risks to Financial Stability?

Author

Listed:
  • Kenechukwu Anadu
  • Mathias Kruttli
  • Patrick McCabe
  • Emilio Osambela

Abstract

The past two decades have seen a significant shift from active to passive investment strategies. We examined how this shift affects financial stability through its impacts on (1) funds’ liquidity and redemption risks, (2) asset market volatility, (3) asset management industry concentration, and (4) comovement of asset returns and liquidity. Overall, the shift appears to be increasing some risks and reducing others. Some passive strategies amplify market volatility, and the shift has increased industry concentration but has diminished some liquidity and redemption risks. Evidence on the links between indexing and comovement of asset returns and liquidity is mixed.Disclosure: The authors report no conflicts of interest. Editor’s Note Submitted 23 January 2020Accepted 22 May 2020 by Stephen J. Brown

Suggested Citation

  • Kenechukwu Anadu & Mathias Kruttli & Patrick McCabe & Emilio Osambela, 2020. "The Shift from Active to Passive Investing: Risks to Financial Stability?," Financial Analysts Journal, Taylor & Francis Journals, vol. 76(4), pages 23-39, October.
    • Handle: RePEc:taf:ufajxx:v:76:y:2020:i:4:p:23-39
    DOI: 10.1080/0015198X.2020.1779498
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/0015198X.2020.1779498
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/0015198X.2020.1779498?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Juan Laborda & Ricardo Laborda & Javier Cruz, 2024. "Can ETFs affect U.S. financial stability? A quantile cointegration analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-24, December.
    2. Tang, Lu & Tan, Eric K.M. & Low, Rand, 2024. "Complements or substitutes? The effect of ETFs on other managed funds," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    3. Girish Joshi & Ranjan Kumar Dash, 2024. "Exchange-traded funds and the future of passive investments: a bibliometric review and future research agenda," Future Business Journal, Springer, vol. 10(1), pages 1-21, December.
    4. Artiga Gonzalez, Tanja & Dyakov, Teodor & Inhoffen, Justus & Wipplinger, Evert, 2024. "Crowding of international mutual funds," Journal of Banking & Finance, Elsevier, vol. 164(C).
    5. Ewens, Michael & Farre-Mensa, Joan, 2021. "Private or Public Equity? The Evolving Entrepreneurial Finance Landscape," SocArXiv 9am4w_v1, Center for Open Science.
    6. Ning, Wei & Zhao, Jiahua & Jiang, Fuwei, 2024. "ETFs and tail dependence: Evidence from Chinese stock market," Journal of International Money and Finance, Elsevier, vol. 149(C).
    7. Guimaraes, Bernardo & Pannella, Pierluca, 2024. "Short-covering bubbles," Journal of Economic Theory, Elsevier, vol. 219(C).
    8. Pedro Reis & Ana Paula Serra & Jo~ao Gama, 2025. "The Role of Deep Learning in Financial Asset Management: A Systematic Review," Papers 2503.01591, arXiv.org.
    9. Karim Belcaid & Sara El Aoufi & Mamdouh Abdulaziz Saleh Al-Faryan, 2024. "Dynamics of Contagion Risk Among World Markets in Times of Crises: A Financial Network Perspective," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 31(4), pages 1007-1033, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:ufajxx:v:76:y:2020:i:4:p:23-39. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/ufaj20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.