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Forbes (2022)

“Why is stock market concentration bad for the economy?” Journal of Financial Economics (2021)

Although the stocks of thousands of companies trade in the U.S. every day, a surprisingly large fraction of the value of the overall stock market derives from just a few companies – like Apple, Amazon, Google and Exxon?  In fact, this is a characteristic common to almost every stock market around the globe, and it is even more pronounced in stock markets outside the U.S.  This phenomenon, known as stock market concentration, is the subject of a study by Boler College Assistant Professor of Finance Jisok Kang, and coauthors Kee-Hong Bae of York University in Canada and Warren Bailey of Cornell University.  The study produces evidence that the concentration of market value in a few stocks actually negatively impacts important economic outcomes like the rate of technological innovation and the rate at which an economy grows.  Their study raises interesting – and difficult – questions about the forces that drive stock market concentration.  The answers are especially important for the design of economic policies that might counteract these forces and increase the prosperity of the economy through innovation and growth.