| Journal of Financial Economics
Stock Price Fragility
We investigate the relationship between ownership structure of financial assets and non-fundamental risk. We define an asset to be fragile if it is susceptible to non-fundamental trading shocks. An asset can be fragile because of concentrated ownership or because its owners face correlated liquidity shocks, i.e., they must buy or sell at the same time. Two assets are co-fragile if their owners have correlated trading needs, even if the holdings of these owners do not directly overlap. We formalize this idea and apply it to the ownership of U.S. stocks between 1990 and 2007. Consistent with our predictions, fragility strongly predicts future price volatility, and co-fragility predicts cross-stock return comovement.
Risk and Uncertainty;
Forecasting and Prediction;
Greenwood, Robin, and David Thesmar. "Stock Price Fragility." Journal of Financial Economics 102, no. 3 (December 2011).