Common Ownership, Institutional Investors, and Welfare

30 Pages Posted: 2 Jan 2019 Last revised: 5 Dec 2019

See all articles by Oz Shy

Oz Shy

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Rune Stenbacka

Hanken School of Economics

Date Written: December 3, 2019

Abstract

This study evaluates the effects of institutional investors' common ownership of firms competing in the same market. Overall, common ownership has two opposing effects: (a) it serves as a device for weakening market competition, and (b) it induces diversification, thereby reducing portfolio risk. We conduct a detailed welfare analysis within which the competition-softening effects of an increased degree of common ownership is weighted against the associated diversification benefits.

Keywords: Common ownership, institutional investors, market power, portfolio diversification.

JEL Classification: G11, G23, G28, L13, L41

Suggested Citation

Shy, Oz and Stenbacka, Rune, Common Ownership, Institutional Investors, and Welfare (December 3, 2019). Available at SSRN: https://ssrn.com/abstract=3302078 or http://dx.doi.org/10.2139/ssrn.3302078

Oz Shy (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

HOME PAGE: http://https://www.frbatlanta.org/research/economists/shy-oz.aspx

Rune Stenbacka

Hanken School of Economics ( email )

P.O. Box 479
FI-00101 Helsinki, 00101
Finland
+35 89 4313 3433 (Phone)
+35 89 4313 3382 (Fax)

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