Scandinavian Working Papers in Economics
Knut Wicksell Working Paper Series,
Lund University, Knut Wicksell Centre for Financial Studies
No 2016/3: Ownership Determinants of Stock Return Volatility
Håkan Jankensgård and Anders Vilhelmsson
Additional contact information
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
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
38 pages, May 24, 2016
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