ETFs Are Influencing Stock Prices and Asset Allocation, Research Finds

Check out ThinkAdvisor's article highlighting DataTrek co-founder Nick Colas' work on how ETFs impact stocks:

"ETFs account for less than 10% of assets in the U.S. stock market, but they are playing an increasingly influential role in how stocks are priced and how assets are allocated, according to Nicholas Colas, co-founder of DataTrek Research.

'Instead of picking an active fund manager, investors from individuals to RIAs, family offices and large institutional investors now choose what we will call ‘attributes’ … geographic concentration, market cap, growth/value, sectors and other basic investment characteristics,' writes Colas in his latest market report. That shift, he adds, 'represents a fundamental change in how capital allocation works in U.S. public markets'.

To illustrate how ETFs change capital allocations and impact marginal prices, Colas studied two stocks in which ETFs held 6% of their outstanding shares — Apple and JPMorgan, whose performances are sharply different year to date. Apple shares are up about 10%; JPMorgan shares about 0.5%."....