Dispersed ownership and asset pricing: an unpriced premium associated with free float
Dispersed ownership and asset pricing: an unpriced premium associated with free float
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. Within institutional contexts supportive of arm’s length contracting and external financing, there is an increased importance in asset pricing on the size of listings and how dispersed as opposed to concentrated these are
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
9 November 2024
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Hearn, Bruce
(2024)
Dispersed ownership and asset pricing: an unpriced premium associated with free float.
International Corporate Governance Society - annual meeting 2024: ICGS 2024, Arizona State University, Pheonix, Arizona, USA, Pheonix, United States.
09 - 10 Nov 2024.
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Conference or Workshop Item
(Paper)
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. Within institutional contexts supportive of arm’s length contracting and external financing, there is an increased importance in asset pricing on the size of listings and how dispersed as opposed to concentrated these are
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Published date: 9 November 2024
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International Corporate Governance Society - annual meeting 2024: ICGS 2024, Arizona State University, Pheonix, Arizona, USA, Pheonix, United States, 2024-11-09 - 2024-11-10
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Local EPrints ID: 509455
URI: http://eprints.soton.ac.uk/id/eprint/509455
PURE UUID: 592f5869-e71c-41c0-95ab-ead16a90982f
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Date deposited: 23 Feb 2026 17:50
Last modified: 24 Feb 2026 02:58
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