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Alternative Data, Firms' Ownership and Stock Price Fragility

Author

Listed:
  • Bonelli, Maxime

    (London Business School)

  • Foucault, Thierry

    (HEC Paris - Finance Department)

Abstract

We study how technological innovations in information production affect firms' ownership structures. Focusing on the expansion of commercial alternative data, we develop a novel text-based measure of firm-level alternative data coverage. We show that greater alternative data coverage reallocates ownership away from long-term investors and toward hedge funds, which trade more actively and shorten their holding horizons. While this ownership reallocation reduces stock return comovement with the market and industry, consistent with greater incorporation of firm-specific information into prices, it also increases stock price fragility: During market downturns, hedge funds reduce their holdings more aggressively, making highly covered firms' stock prices more sensitive to market-wide shocks. Overall, our findings show that ownership reallocation is one channel through which changes in firms' information environment can increase stock price fragility.

Suggested Citation

  • Bonelli, Maxime & Foucault, Thierry, 2026. "Alternative Data, Firms' Ownership and Stock Price Fragility," HEC Research Papers Series 1656, HEC Paris.
    • Handle: RePEc:ebg:heccah:1656
    DOI: 10.2139/ssrn.7348301
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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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