While the first funds were attracted into index investing in the mid-70s, initial growth was very slow. The pace has picked up in recent years with predictions being that index investing will represent half of all US equity investing within the next few years.

Irrespective of the advantages of passive investing, one particular disadvantage is that it make no contribution to the price formation process and so has potential negative implications for the efficiency and stability of markets. This is the focus of the first research paper below, which examines the impl...