macrocephalopod

even a basic analysis of etf creation and redemption would show you that fund flows are driven by momentum

furthermore the S&P 500 itself, by virtue of being cap weighted drops companies when they fall which is the definition of momentum investing

To your first point, yes absolutely, but that creates *absolute* momentum (al companies go up together) not *relative* momentum (biggest winners rise more)

the biggest winning ETFs get larger inflows, statistically, and have for over 7 years - which - because there are different indices -- drives relative outperformance of names therein -- which is explicitly a momentum effect

Yes I completely agree, eg the names in the ARK ETFs are clearly going up because of inflows to those ETFs, I have never claimed otherwise! But importantly *they are all going up together* in fact they have become super correlated purely by virtue of being held by ARK.

I mean there are tons of momentum distortionary effects, but my favorite is just the reduced liquidity and the minor price distortion of redem/creation

TBF he’s talking about specifically forced buying and selling of shares, which is indeed a fantasy, not just price distortion which assuredly happens