Making Sense Data Assets & Alpha Group: Equity concentration risks and the retail investor
Apr 23, 2024
Chris Andrew, Head of EMEA Market Structure at JP Morgan, discusses the increasing concentration of turnover ratios in US stocks and sectors driven by retail investors, the interplay between retail and institutional investors, and the potential path for equity markets and liquidity. The podcast also highlights the impact of decreasing turnover ratios on European market liquidity, contrasting liquidity trends across global markets, and the risks associated with momentum factor and market concentration.
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Diverging Turnover Trends By Region
- Turnover ratio measures how quickly a company's shares change hands and is rising in the US but declining in Europe since 2016.
- This divergence makes Europe a global outlier in market liquidity trends.
Extreme Turnover Concentration In US Stocks
- US trading has become highly concentrated: the single most-traded S&P stock rose from ~4% to ~13% of S&P turnover between 2016 and 2024.
- The top 25 S&P names now account for over half of trading, far above European concentration.
Trading Beats Capitalization In Concentration
- The usual pattern where value is more concentrated than trading has reversed in the US since the pandemic.
- Trading activity is now more concentrated than capitalization in US markets.