Could it simply be that hedge funds have alpha, so the stocks they buy tend to rise in price and that makes them more likely to meet index criteria? It’s not necessarily an explicit index arbitrage trade.
Well, if you believe hedge funds on average have alpha, I admire your optimism :-). But all cynicism aside, I talked to a couple of market makers and they all said that hedge funds not only have dedicated index arb teams, but that they get into the game really early, so it seems that anecdotally the explanation in the post is the right one.
Very interesting and for me personal. (Is this about me buying AXON at 220 a share!)
Thank you. :)
Curious why only ETFs? Wouldn't this impact mutual funds as well or is this like the financial media moving away from the DJIA? :)
It affects every index fund, whether that is an ETF or an index mutual fund.
Could it simply be that hedge funds have alpha, so the stocks they buy tend to rise in price and that makes them more likely to meet index criteria? It’s not necessarily an explicit index arbitrage trade.
Well, if you believe hedge funds on average have alpha, I admire your optimism :-). But all cynicism aside, I talked to a couple of market makers and they all said that hedge funds not only have dedicated index arb teams, but that they get into the game really early, so it seems that anecdotally the explanation in the post is the right one.