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

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  • Hearn, Bruce
  • Filatotchev, Igor
  • Goergen, Marc

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.

Suggested Citation

  • Hearn, Bruce & Filatotchev, Igor & Goergen, Marc, 2025. "Dispersed ownership and asset pricing: An unpriced premium associated with free float," Journal of Corporate Finance, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:corfin:v:92:y:2025:i:c:s0929119925000318
    DOI: 10.1016/j.jcorpfin.2025.102763
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    More about this item

    Keywords

    CAPM; Free float; Ownership and control; Investor protection;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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