Work

Dispersed ownership and asset pricing: An unpriced premium associated with free float

Year: 2025

Type: article

Abstract: We explore differences in the levels of dispersed ownership that lead to a returns-based free float hedging factor in addition to size, which augments the capital asset pricing model (CAPM) in explaining the cross-section of stock returns . Using the S&P 1500 stocks in the US between 1985 and 2023, the results support the advantages of free float within a three-factor CAPM including size over alternative models based on liquidity, book-to-market value, and momentum. We argue that this yields a useful means for hedging effectively against the risks associated with the fundamental underlying likelihood of expropriation in a specific firm based on its ownership structure.

Source: Journal of Corporate Finance

DOI: 10.1016/j.jcorpfin.2025.102763

Authors: Bruce Hearn, Igor Filatotchev, Marc Goergen

Institutions: University of Southampton, Vienna University of Economics and Business, King's College London, IE University, European Corporate Governance Institute

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $4,140

Funders: European Regional Development Fund, Agencia Estatal de Investigación