How to diversify your portfolio to avoid market risks (19/20)

C’est la théorie des marchés efficients qui a propulsé les ETFs. Paradoxalement cette théorie risque bien de créer une des plus grosses anomalies du marché. En effet, puisque les investisseurs professionnels et privés ont décidé de se contenter de la « moyenne », ils gonflent artificiellement l’indice, peu importe ce qui s’y trouve. On verra ainsi des titres de sociétés aux fondamentaux en déroute être sous perfusion artificielle de la gestion indicielle. Dans le même temps des small-caps en pleine forme seront boudées par le marché parce qu’elles ne figurent pas dans les indices les plus suivis.

We have the same problem with countries and regions, and between economic sectors. ETFs over-represent entire sections of the economy to the detriment of others. It will be argued that they respect the real distribution (the most followed stocks are those of large American companies and other developed countries), although I think that there is still a significant bias in favor of the latter. But in any case, even if in the best case the balance were really respected, that would not change the problem of the drip-feeding of stocks in full collapse and the lack of interest in those that are not followed by the largest ETFs.

As said Warren Buffet, value investors have every interest in the efficient markets theory gaining a large number of followers because this creates even more market anomalies. This is reminiscent of another hypothesis of the efficient markets theory that has been swept away by the facts. Access to information was indeed supposed to allow investors to set the price of shares in the most rational way possible. However, we realize that on the contrary the mass of information available thanks to the Internet makes the market overreact, both upwards and downwards. Typically, the Internet bubble was self-sustaining thanks to a quantity of rumors and false information spread on stock market forums. We know how that ended…