Concentration of Trading in S&P 500 Stocks

20 Pages Posted: 7 Mar 2016

See all articles by S. Gowri Shankar

S. Gowri Shankar

University of Washington, Bothell School of Business

James M. Miller

University of Washington, Bothell - Business

P. V. (Sundar) Balakrishnan

Univ. of Washington, Bothell

Date Written: February 12, 2015

Abstract

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

Shankar, S. Gowri and Miller, James M. and Balakrishnan, P. V. (Sundar), Concentration of Trading in S&P 500 Stocks (February 12, 2015). Available at SSRN: https://ssrn.com/abstract=2742363 or http://dx.doi.org/10.2139/ssrn.2742363

S. Gowri Shankar (Contact Author)

University of Washington, Bothell School of Business ( email )

18115 Campus Way NE
Bothell, WA 98011-8246
United States

James M. Miller

University of Washington, Bothell - Business ( email )

18115 Campus Way NE
Bothell, WA 98011-8246
United States

P. V. (Sundar) Balakrishnan

Univ. of Washington, Bothell ( email )

18115 Campus Way NE
Bothell, WA 98011-8246
United States
4253525384 (Phone)

HOME PAGE: http://www.uwb.edu/business/faculty/sbalakrishnan

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