Changing Times, Changing Values: A Historical Analysis of Sectors within the US Stock Market 1872-2013

Oliver Bunn, Robert Shiller

Research

76 Pages

This paper examines how passive investing’s explosive growth may be distorting market structure, weakening price discovery, and increasing concentration risk across equities. The authors argue passive ownership above 50% in some sectors could amplify volatility during stress periods, challenging assumptions about diversification and market efficiency.

Key Takeaways

Passive Ownership Surge: Passive funds now control more than 54% of U.S. equity fund assets, up from just 19% in 2010, reshaping liquidity dynamics and stock correlations.
Concentration Risk Rising: The top 10 stocks accounted for roughly 33% of the S&P 500 in 2024, approaching levels last seen during the 2000 technology bubble.
Price Discovery Weakening: Stocks with higher passive ownership showed up to 20% lower idiosyncratic trading activity, suggesting fundamentals may matter less in short term pricing.
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