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Dispersed ownership and asset pricing: An unpriced premium associated with free float

Bruce Hearn, Igor Filatotchev and Marc Goergen

Journal of Corporate Finance, 2025, vol. 92, issue C

Abstract: We explore differences in the levels of dispersed ownership that lead to a returns-based free float hedging factor in addition to size, which augments the capital asset pricing model (CAPM) in explaining the cross-section of stock returns. Using the S&P 1500 stocks in the US between 1985 and 2023, the results support the advantages of free float within a three-factor CAPM including size over alternative models based on liquidity, book-to-market value, and momentum. We argue that this yields a useful means for hedging effectively against the risks associated with the fundamental underlying likelihood of expropriation in a specific firm based on its ownership structure.

Keywords: CAPM; Free float; Ownership and control; Investor protection (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 O55 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:92:y:2025:i:c:s0929119925000318

DOI: 10.1016/j.jcorpfin.2025.102763

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