Abstract
An essential foundation of modern financial theory is the assumption that markets are efficient. The abnormal stock return associated with inclusion in a market index presents a persistent empirical challenge to this hypothesis, and has often been attributed to the growing market share of passive investment management strategies. This study attempts to replicate the findings of previous research on the size of the Index Effect using more recent data, and to determine the extent to which the growth of exchange traded funds as a novel investment vehicle is impacting that size. My results show an Index Effect that decreased between 2000 and 2021 to nearly zero and identify a negative relationship between the growth of index ETFs and the effect size, providing more context to earlier studies that relate abnormal index return to passive investment strategies more generally.