High transaction costs indexing would be favored by

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High transaction costs : indexing would be favored by the implied lower levels of trading activity and costs. Settlement problems : indexing would be favored by the implied lower levels of trading activity and settlement requirements. Financial disclosure and accounting standards : wide public availability of reliable financial information presumably leads to greater market efficiency, reducing the value of both fundamental analysis and active management, and favoring indexing. Restrictions of capital flows : indexing would be favored by the implied lower levels of trading activity and thus smaller opportunity for regulatory interference. b. A recommendation for active management would focus on short-term inefficiencies in, and long term prospects for, the developing Otunian markets and economy, inefficiencies and prospects which would not generally be found in more developed markets. A recommendation for indexing would focus on the factors of economic diversity, high transaction costs, settlement delays, capital flow restrictions, and lower management fees. 25-7
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