Working Paper: CEPR ID: DP16378
Authors: Vimal Balasubramaniam; John Y. Campbell; Benjamin Ranish; Tarun Ramadorai
Abstract: We build a cross-sectional factor model for investors' direct stockholdings, by analogy with standard time-series factor models for stock returns. We estimate the model using data from almost 10 million retail accounts in the Indian stock market. We find that stock characteristics such as firm age and share price have strong investor clienteles associated with them. Similarly, account attributes such as account age, account size, and extreme underdiversification (holding a single stock) are associated with particular characteristic preferences. Coheld stocks tend to have higher return covariance, suggestive of the importance of clientele effects in the stock market.
Keywords: stockholding; factor models; coholdings; portfolio construction; diversification; retail investors
JEL Codes: G2; G11; G12; G14; G5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firm age (L10) | clientele effects (D26) |
| share price (G12) | clientele effects (D26) |
| clientele effects (D26) | stock market dynamics (G10) |
| account age (M41) | stock characteristics preferences (L15) |
| account size (M41) | stock characteristics preferences (L15) |
| firm age (L10) | investor groups attraction (G24) |
| share price (G12) | investor groups attraction (G24) |