Passive Stock Investors Are Bigger Market Force Than Thought, Study Says

People on Wall Street console themselves over the relentless march of passive by downplaying its scale. Sure, index funds have ballooned in size, but most estimates put passive ownership of the US stock market at around 15% -- not enough to get worked up about.

But what if it’s actually double that?

Struck by the massive amount of stock that changes hands every year when index funds reshuffle their holdings, Alex Chinco at the City University of New York and Marco Sammon at Harvard Business School decided to see if current estimates of passive ownership explained all the volume.

They found that accepted reckonings of passive’s size -- usually around 15% of the market -- came nowhere near the billions of dollars worth of stock that traded on those days. Instead, it looks more like 37.8%, or $16 trillion.