What is the effect of stock indexing on information arbitrage and the efficacy of the price discovery process? Forty-five years after John C. Bogle, the Vanguard Group founder, launched the world’s first index mutual fund, and 30 years after the debut of State Street’s S&P 500 ETF on Jan. 22, 1993, index investing continues to grow.

The rise of stock indexing has reshaped investing by democratizing access to low-cost passive strategies. Yet, it has also raised concerns that stock indexing impedes arbitrage and degrades price discovery. The conventional argument is that indexing is akin to free riding on other people’s … Read more