Tail can wag dog when ETFs influence single stocks, Goldman Sach says

ETFs, which are bundles of securities that trade like stocks on an exchange and usually track an index, have exploded in popularity over the last decade.

Exchange-traded funds have gotten just too large that they often influence exchanging individual stocks, Goldman Sachs Group Inc. said.

Researchers at the New York-based firm examined industry ETFs and their relationship to exchanging members with lower volume. They found the process of buying and selling shares to create and redeem the funds taken into account significant amounts of trading in constituent shares.

\”The outsized growth in ETFs along with lower market liquidity lays the stage for a cocktail of single stock impact that few investors, we believe, fully appreciate,\” Robert Boroujerdi and Katherine Fogertey, New York-based analysts at Goldman Sachs, wrote inside a note dated Friday.


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