The dominance of a handful of tech stocks in the equity market is likely linked to investors’ massive appetite for cheap index funds, which in turn could be a hidden risk for Wall Street, according to Bank of America. “Because passive investing is less sensitive to valuation and other fundamentals, some market participants worry that passive funds make markets less efficient. And since most passive funds are weighted by market-capitalization, passive flows can exacerbate market concentration, thereby reducing diversification”
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