The Passive-Ownership Share Is Double What You Think It Is

54 Pages Posted: 10 Sep 2022 Last revised: 6 Sep 2023

See all articles by Alex Chinco

Alex Chinco

City University of NY, Baruch College, Zicklin School of Business

Marco Sammon

Harvard Business School

Date Written: September 4, 2023

Abstract

Each time a stock gets added to or dropped from an index, we ask: “How much money would have to be tracking that index to explain the huge spike in rebalancing volume we observe on reconstitution day?” While index funds held 16% of the US stock market in 2021, we put the true passive-ownership share at 33.5%. Our headline number is twice as large because it reflects index funds as well as two other kinds of passive investors, direct indexers and active managers who are closet indexing.

Keywords: Passive Ownership, Index-Linked Investing, Prearranged Trades, Index Funds, Direct Indexers, Reconstitution Day

JEL Classification: G11, G14, G23

Suggested Citation

Chinco, Alexander and Sammon, Marco, The Passive-Ownership Share Is Double What You Think It Is (September 4, 2023). Available at SSRN: https://ssrn.com/abstract=4188052 or http://dx.doi.org/10.2139/ssrn.4188052

Alexander Chinco (Contact Author)

City University of NY, Baruch College, Zicklin School of Business ( email )

One Bernard Baruch Way
New York, NY 10010
United States

HOME PAGE: http://www.alexchinco.com

Marco Sammon

Harvard Business School ( email )

Boston, MA 02163
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
904
Abstract Views
3,676
Rank
44,118
PlumX Metrics