What Does Stock Ownership Breadth Measure?
Using holdings data on a representative sample of all Shanghai Stock Exchange investors, we show that increases in ownership breadth (the fraction of market participants who own a stock) predict low returns: highest change quintile stocks underperform lowest quintile stocks by 23% per year. Small retail investors drive this result. Retail ownership breadth increases appear to be correlated with overpricing. Among institutional investors, however, the opposite holds: Stocks in the top decile of wealth-weightedinstitutionalbreadth change outperform the bottom decile by 8% per year, consistent with prior work that interprets breadth as a measure of short-sales constraints.
Yale School of Management and NBER.
James J
JJ
Choi
Oxford University Saïd Business School and Peking University Guanghua School of Management.
Li
L
Jin
Yale School of Management.
Hongjun
H
Yan