Ownership Determinants of Stock Return Volatility

Håkan Jankensgård and Anders Vilhelmsson
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Håkan Jankensgård: Knut Wicksell Centre for Financial Studies, Lund University, Postal: Knut Wicksell Centre for Financial Studies, Lund University School of Economics and Management, P.O. Box 7082, S-220 07 Lund, Sweden
Anders Vilhelmsson: Knut Wicksell Centre for Financial Studies, Lund University, Postal: Knut Wicksell Centre for Financial Studies, Lund University School of Economics and Management, P.O. Box 7082, S-220 07 Lund, Sweden
Authors registered in the RePEc Author Service: Anders Wilhelmsson

No 2016/3, Knut Wicksell Working Paper Series from Lund University, Knut Wicksell Centre for Financial Studies

Abstract: A conjecture in the literature holds that a large and diversified investor base leads to lower volatility by improving the quality of the price signal. In this paper this hypothesis is examined using unique Swedish ownership data. The data does not support the conjecture. Instead, volatility increases in the number of shareholders and in the size of the firm’s micro-float (the fraction of shares held by investors with stakes below 0.1%). We also show that proxies for the portfolio concentration of the largest owners are important. We conclude that ownership structure has major implications for stock return volatility.

Keywords: Volatility; ownership; investor base; portfolio concentration (search for similar items in EconPapers)
JEL-codes: G10 G30 G32 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2016-05-24
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