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The passive ownership share is double what you think it is

Author

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  • Chinco, Alex
  • Sammon, Marco

Abstract

Each time a stock gets added to or dropped from an index, we ask: “How much money would have to be tracking that index to explain the huge spike in rebalancing volume we observe on reconstitution day?” While index funds held 16% of the US stock market in 2021, we put the overall passive ownership share at 33.5%. Our headline number is twice as large because it reflects index funds as well as other kinds of passive investors, such as institutional investors with internally managed index portfolios and active managers who are closet indexing.

Suggested Citation

  • Chinco, Alex & Sammon, Marco, 2024. "The passive ownership share is double what you think it is," Journal of Financial Economics, Elsevier, vol. 157(C).
    • Handle: RePEc:eee:jfinec:v:157:y:2024:i:c:s0304405x24000837
    DOI: 10.1016/j.jfineco.2024.103860
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    Cited by:

    1. Sanctuary, Mark & Lavenius, Axel & Parlato, Giorgio & Plue, Jan & Crona, Beatrice, 2024. "A study of green European equity fund portfolio allocations," Working Paper Series in Economics and Institutions of Innovation 499, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.

    More about this item

    Keywords

    Passive ownership; Index-linked investing; Prearranged trades; Index funds; Internal indexing; Reconstitution day; G11; G14; G23;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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