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Technology Stocks : America On-Line: will it survive ...?
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To: JC Reddy who wrote (12803)12/22/1998 6:48:00 PM
From: Roy F  Read Replies (1) of 13594
 
My understanding is that an index fund is required to own all the stocks in the index. There may be a weighting based on the size of the company, but, to be an index fund, the manager must own all the stocks in the index (this may vary according to the concept of the individual fund). Once the initial position is purchased, new funds would be allocated according to the established weighting.

This, it would appear, would have the effect of reducing the float, as these shares will not be traded, only held (unless the weighting needs to be adjusted). In this regard, it would seem that the volatility would increase due to the smaller number of tradable shares.

Regards,

Roy
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