Indexing does not set valuations because it buys everything proportionally and therefore cannot be overweighting large stocks relative to small stocks, and index fund trading represents only 5% of daily NYSE volume, so the impact on pricing is minimal.

Stock dispersion in the S&P 500 has not changed over 50 years, proving that indexing has not distorted markets or made stocks move together; the absence of dispersion change is evidence against passive-driven market distortion.