Active Investors, Passive Investors, and Common Ownership

Market Ecology of Active and Passive Investors

We study the role of active and passive investors in an investment market with uncertainties. Active investors concentrate on a single or a few stocks with a given probability of determining the quality of them. Passive investors spread their investment uniformly, resembling buying the market index. In this toy market stocks are introduced as good and bad. If a stock receives sufficient investm...

Tax Avoidance and Institutional Ownership: Active vs. Passive Ownership

Income tax is one of the most important costs of companies and it is usually considered as a cost that should not be paid. One of the most noticeable and influential factors in tax avoidance is corporate ownership structure. With an emphasis on institutional ownership and its types in this paper, it is attempted to measure the effect of this ownership and its types on corporate tax avoidance. F...

Protecting investors

On December 15, 2010, after 11 months of legal standoff, the Swiss corporation Novartis finally closed a deal to acquire the remaining shares of eye-care company Alcon from minority shareholders. Why did it take almost a year? The acquisition had become a relatedparty transaction after Novartis purchased a 25% stake from then majority shareholder Nestlé and nominated some of its own directors t...

Investors and Management Practice:

The Consumption of Active Investors and Asset Prices

Active investors in capital markets are wealthy and derive a large fraction of their income from the capital they own. I use flow of funds data to construct a consumption expenditure series for these active investors. The volatility of the aggregate consumption growth of active households is much higher than that of aggregate consumption. The resulting stochastic discount factor is tested on th...