Working Paper: NBER ID: w29065
Authors: Vimal Balasubramaniam; John Y. Campbell; Tarun Ramadorai; Benjamin Ranish
Abstract: We build a cross-sectional factor model for investors' direct stock holdings, 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: household portfolio choice; clientele effects; cross-sectional factor model
JEL Codes: G11; G51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Investor characteristics (account age, size) (G11) | Stock characteristics (preferences for established stocks) (G41) |
| Investor characteristics (account age, size) (G11) | Stock characteristics (preferences for high-risk stocks) (G41) |
| Stock characteristics (firm age, share price) (L25) | Clientele effects (D26) |
| Coholdings (Q15) | Return covariances (C10) |
| Clientele effects (D26) | Stock return comovements (G17) |