Common-Ownership and Portfolio Rebalancing

64 Pages Posted: 1 Oct 2019 Last revised: 29 Nov 2019

See all articles by Eyub Yegen

Eyub Yegen

University of Toronto, Rotman School of Management, Finance Area, University of Toronto, Finance Area

Date Written: March 1, 2019


The empirical literature on the potential collusive effects of common-ownership relies heavily on financial institution mergers to make causal inferences. I find that more than 85% of newly-formed common-ownership relationships due to such financial institution mergers are no longer commonly-held by the acquiring institution during the post-merger period (with most being liquidated in the first quarter following the merger). Firms that are no longer commonly-held by the merged institution drive the anti-competitive results found in previous studies. The fact that portfolio firms are so quickly rebalanced casts doubt on the utility of financial institution mergers as a natural experiment. I also find evidence that portfolio rebalancing post-merger is driven by other factors, such as portfolio diversification or index tracking. Further, I find no significant positive risk-adjusted returns for a common-ownership based portfolio strategy, suggesting that investors do not make a profit from commonly-held stocks. Taken together, these findings suggest that empirical basis for claiming collusive effects of common-ownership is weaker than it appears and there is no strong evidence that provides a basis for policy concerns about institutional common-ownership.

Keywords: Institutional Common-Ownership, Competition, Portfolio Rebalancing

JEL Classification: G23, G32, G34, L11, L25

Suggested Citation

Yegen, Eyub, Common-Ownership and Portfolio Rebalancing (March 1, 2019). Proceedings of Paris December 2019 Finance Meeting EUROFIDAI - ESSEC, Available at SSRN: or

Eyub Yegen (Contact Author)

University of Toronto, Rotman School of Management, Finance Area, University of Toronto, Finance Area ( email )

Toronto, Ontario

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