Fireside chat: The Rise of Passive Investing

In 2024, total assets inx US passive strategies surpassed those in active ones for the first time. What are the implications of investors switching to passive strategies? SHoF researchers discussed the adoption of index-based investing.

In 2024, for the first time, total assets in US passive strategies surpassed those in active ones for the first time, according to Morningstar. This milestone raises important questions about the future of the stock market.  

To delve deeper into this topic, the Swedish House of Finance hosted a “fireside chat” with SHoF researchers Alexander Ljungqvist and Paul Huebner. The conversation was based on a recent paper. 

They addressed:

  • What is the role of competition for making the market less fragile and more stable?
  • What are the implications for market efficiency, volatility, and liquidity?
  • Has this shift towards passive investing contributed toward the formation of bubbles in large stocks?
  • Is there a need for more regulation of passive investing strategies?

This was an off-the-record, informal exchange of ideas exclusive to SHoF’s partner organizations and invited guests. 

Participants: 

Alexander Ljungqvist 

Researcher at SHoF and Stefan Persson Family Chair in Entrepreneurial Finance, Department of Finance, Stockholm School of Economics 

His research primarily focuses on entrepreneurial finance, venture capital, and private equity, with an emphasis on the financial strategies of startups and high-growth firms. He has published extensively in top academic journals and is a highly regarded speaker at international conferences. 

 

Paul Huebner 

Researcher at SHoF and Assistant Professor, Department of Finance, Stockholm School of Economics 

His research interests lie in the areas of financial intermediation and asset pricing. His work explores the decision-making behind investors' financial portfolio choices and their impact on asset prices and the broader economy. The methods he uses can be applied to answer counterfactual questions, or the "what ifs" that can inform regulatory and policy decisions.