Concentration of Trading in S&P 500 Stocks
20 Pages Posted: 7 Mar 2016
Date Written: February 12, 2015
We use the power law function to study changes in the distribution of trading volumes of S&P 500 stocks and non-S&P 500 stocks from 1960 to 2013. We find that the distribution of daily trading volumes has changed significantly for different baskets of non-index stocks and trading has become more concentrated over this time. However, the distribution of trading volumes in S&P 500 stocks follows a different pattern. The trading concentration in S&P 500 stocks increases from 1960 to 1975 but the trend reverses sharply thereafter and steadily decreases, indicating that the distribution has steadily become more even from 1976 to 2013. This anomalous trading behavior appears to be driven by the introduction and, later, the dominance of index fund investors over active stock pickers in the trading of S&P 500 stocks.
Keywords: S&P 500; Ziof; Trading volume; concentration; index funds
JEL Classification: G10; G14; D39; H39
Suggested Citation: Suggested Citation