The Distribution of Investor Beliefs, Stock Ownership and Stock Returns

We study theoretically and empirically the relationship between investor beliefs, ownership dispersion stock returns. find that high dispersion, measured by breadth or low Herfindahl index, forecasts returns positively for large stocks, as in Chen, Hong Stein (2002), but negatively small stocks. explain a difference-of-opinion model which stocks differ size of disagreements extent belief polarization. These differences are characterized range kurtosis, respectively. Proxying beliefs analyst forecasts, we kurtosis affect way our predicts. Institutional subscribers to NBER working paper series, residents developing countries may download this without additional charge at www.nber.org.