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The Journal of Portfolio Management

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Primary Article

The Growth of Index Funds and the Pricing of Equity Securities

Burton G. Malkiel and Aleksander Radisich
The Journal of Portfolio Management Winter 2001, 27 (2) 9-21; DOI: https://doi.org/10.3905/jpm.2001.319788
Burton G. Malkiel
Chemical Bank chairman's professor of economics at Princeton University in Princeton (NJ 08544).
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Aleksander Radisich
Assistant professor of economics at California State University in Long Beach (CA 90840).
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Abstract

The authors examine the hypothesis that the popularity of indexing to the S&P 500 had a self–fulfilling effect of inflating the prices of the stocks in the index during the 1990s. They conclude instead that the success of indexing results from the general efficiency of U.S. stock markets, and that the gap between the performance of index funds and active managers can be explained fully by the extra management and transaction costs involved in active management. The authors find no evidence that the success of indexing is self–fulfilling; nor can they substantiate that indexing has any permanent effect on the pricing of securities.

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The Journal of Portfolio Management
Vol. 27, Issue 2
Winter 2001
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The Growth of Index Funds and the Pricing of Equity Securities
Burton G. Malkiel, Aleksander Radisich
The Journal of Portfolio Management Jan 2001, 27 (2) 9-21; DOI: 10.3905/jpm.2001.319788

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The Growth of Index Funds and the Pricing of Equity Securities
Burton G. Malkiel, Aleksander Radisich
The Journal of Portfolio Management Jan 2001, 27 (2) 9-21; DOI: 10.3905/jpm.2001.319788
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