Keeping it Simple with Simplify Asset Management Keeping it Simple | Ep. 45: Valentin Haddad — No Love For EMH
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Feb 10, 2025 
Valentin Haddad, an Associate Professor at UCLA's Anderson School of Management, dives deep into passive investing's impact on market dynamics. He critiques traditional financial theories, highlighting the Grossman-Stiglitz Paradox, while discussing how passive strategies can distort market efficiency. The conversation explores the evolving landscape of active management and index arbitrage, plus misconceptions about market capitalization and liquidity. Haddad emphasizes the importance of portfolio diversification and adapting investment strategies to individual goals.
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Passive Investing Isn't Passive
- Passive investors, like Vanguard and BlackRock, receive continuous inflows of capital.
- This constant influx prevents them from being truly passive, as they must continuously participate in the market.
Market Inefficiencies
- Traditional market models assume perfect information and immediate reactions to price discrepancies.
- However, real-world frictions and the nature of passive flows make markets less efficient.
Focus on Trading Behavior
- Instead of focusing on information, observing actual trading behavior reveals market mechanics.
- This 'down-to-earth' view helps understand how different institutions trade and market dynamics.