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<p>This study examines the relationship between common ownership and the correlation of stock returns. Using S&amp;P 500 data, we find that higher levels of common ownership at the individual investor level are associated with stronger pairwise correlations of stock returns in subsequent periods. This relationship holds across multiple industries and remains robust after controlling for factors such as market risks, stock prices, liquidity, financial leverage, index additions, geographic proximity, correlated trading, and the level of competition in the industry. Our findings indicate that these effects are not solely driven by large institutional investors. Another contribution of our study is distinguishing between the effects driven by the level and the similarity of these control variables. Moreover, since reduced competition is associated with higher stock return correlation, our results are consistent with the existence of anticompetitive effects of common ownership across several industries. We provide further support for this competition channel by demonstrating that this effect is mainly driven by longer-term investors. Our findings have important policy implications, suggesting that antitrust regulations should consider indirect competitive effects from common ownership, even without explicit coordination between companies.</p>

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Investor-level common ownership, stock return comovement, and competition

  • 期刊论文

  • 发表日期：

    2025年8月2日

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  • Markus Münster,
  • Martin Walther

摘要

This study examines the relationship between common ownership and the correlation of stock returns. Using S&P 500 data, we find that higher levels of common ownership at the individual investor level are associated with stronger pairwise correlations of stock returns in subsequent periods. This relationship holds across multiple industries and remains robust after controlling for factors such as market risks, stock prices, liquidity, financial leverage, index additions, geographic proximity, correlated trading, and the level of competition in the industry. Our findings indicate that these effects are not solely driven by large institutional investors. Another contribution of our study is distinguishing between the effects driven by the level and the similarity of these control variables. Moreover, since reduced competition is associated with higher stock return correlation, our results are consistent with the existence of anticompetitive effects of common ownership across several industries. We provide further support for this competition channel by demonstrating that this effect is mainly driven by longer-term investors. Our findings have important policy implications, suggesting that antitrust regulations should consider indirect competitive effects from common ownership, even without explicit coordination between companies.