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Discussion Paper Details

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Title: Who Owns What? A Factor Model for Direct Stockholding

Author(s): Vimal Balasubramaniam, John Y Campbell, Tarun Ramadorai and Benjamin Ranish

Publication Date: July 2021

Keyword(s): coholdings, Diversification, factor models, portfolio construction, Retail investors and Stockholding

Programme Area(s): Financial Economics

Abstract: We build a cross-sectional factor model for investors' direct stockholdings, by analogy with standard time-series factor models for stock returns. We estimate the model using data from almost 10 million retail accounts in the Indian stock market. We find that stock characteristics such as firm age and share price have strong investor clienteles associated with them. Similarly, account attributes such as account age, account size, and extreme underdiversification (holding a single stock) are associated with particular characteristic preferences. Coheld stocks tend to have higher return covariance, suggestive of the importance of clientele effects in the stock market.

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Bibliographic Reference

Balasubramaniam, V, Campbell, J, Ramadorai, T and Ranish, B. 2021. 'Who Owns What? A Factor Model for Direct Stockholding'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=16378