Evolutionary disruption of S&P 500 trading concentration: An intriguing tale of a financial innovation.

ABSTRACT: The novel finding of Balakrishnan, Miller & Shankar (2008) that investors, overwhelmed by the plethora of stock investment offerings, limit their analysis and daily choices to only a small subset of stocks (i.e., herding behavior) now seems to be common wisdom (Iosebashvili, 2019). We investigate whether the introduction of an innovation in financial products designed to allow investors to trade the entire product bundle of S&P 500 stocks, namely S&P 500 index funds, altered "herding behavior" by creating a new class of index investors. We model the distribution of daily trading concentration as a power law function and examine changes over the last six decades. Intriguingly, we discover a unique pattern in the trading concentration distribution that exhibits two distinct trends. For the p

SUBMITTER: Shankar SG 

PROVIDER: S-EPMC7092977 | biostudies-literature | 2020

REPOSITORIES: biostudies-literature