In the face of various criticisms on index funds, Lin Xiaodong takes the US stock market as an example to respond one by one. First, with the development of index funds, the dispersion degree of stock market has decreased. Lin Xiaodong pointed out that from 1993 to 2016, the market share of index funds increased from 10% to 46%, and the dispersion degree of stocks did not change.
Second, ETF brings more volatility to the market. Lin Xiaodong believes that there is no correlation between the size of index funds and the volatility of the US stock market.
Third, the index fund as it rebalances with the index has led to some institutional investors chasing up and killing down in the US market. Lin Xiaodong said that index funds only account for 5% of the total market turnover, and the trading volume is small, and has not had any structural impact on the structure and value of the market.