The Hazards of Index-Based Investing to Stewardship

The Financial Times, June 14, 2010

2 Pages Posted: 14 Jun 2010

Abstract

This article argues that the way institutional investors (pension funds, fund managers and others) use stock market indices - in particular, measuring performance based on short-term relative returns, replicating an index's constituent holdings so that equity portfolios (including actively-managed ones) contain an excessively large number of companies, and "underweighting" stocks - vitiates the active, long-term "stewardship" mindset that policymakers in the UK, Netherlands, and other markets are promoting.

Note: This article served as the basis for an opinion piece that appeared in the Financial Times on 14 June 2010.

Keywords: Investment management, shareholder responsibilities, corporate governance

JEL Classification: G23, G34

Suggested Citation

Wong, Simon C. Y., The Hazards of Index-Based Investing to Stewardship. The Financial Times, June 14, 2010, Available at SSRN: https://ssrn.com/abstract=1624542

Simon C. Y. Wong (Contact Author)

Northwestern University School of Law ( email )

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London School of Economics

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London, WC2A 2AE
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HOME PAGE: http://www.lse.ac.uk/collections/law/staff/simon-wong.htm

Tapestry Networks ( email )

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