ETFs, financial stability and the invisible hand

Warnings about the risk that the widespread use of ETFs entails for the proper functioning of financial markets are widespread. The criticism, no matter whether genuine or motivated by interests, is fundamentally based on two complementary narratives: the “dumb money” distortion and the “house of cards” risk. The first points to the misallocation of capital … Continued

Equity home bias and the US stock market supremacy

One of the most documented behavioral anomalies that afflict investors is their preference for the domestic stock market, ignoring the benefits that a portfolio of international stocks can offer in terms of diversification. But beyond the benefits of “statistical” sort, there are factual reasons to avoid this bias. Not only does a broader investment universe … Continued