What Does Stock Ownership Breadth Measure?

James Choi, Li Jin and Hongjun Yan

Review of Finance, 2013, vol. 17, issue 4, 1239-1278

Abstract: 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-weighted institutional breadth change outperform the bottom decile by 8% per year, consistent with prior work that interprets breadth as a measure of short-sales constraints. Copyright 2013, Oxford University Press.

Date: 2013
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Working Paper: What Does Stock Ownership Breadth Measure? (2010)
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