| Since the successful completion of the share-trading reform at the end of 2006,China’s stock market has developed rapidly,and the shareholding structure of listed companies has been increasingly optimized.As an important indicator in the company’s ownership structure system,the change of ownership concentration directly changes the nature and structure of the company’s equity,which may bring about fluctuations in the company’s stock price.Therefore,from the perspective of ownership concentration,which is an indicator of the company’s equity distribution,combined with the listed firm characteristic factors,this paper studies its ability to explain stock returns.While theoretically deepening the formation mechanism of stock prices,it also provides investors with insights.A new investment perspective,using the ownership concentration index to construct a stock selection strategy to earn excess returns.Based on the financial and trading data of listed companies from 2009 to 2020,this paper uses the portfolio analysis method and combines company characteristics to study the relationship between listed companies’ ownership concentration and stock returns.The research shows that,first,the explanatory power of ownership concentration on stock cross-sectional expected returns is different under different equity properties.The ownership concentration in the full sample and the state-owned sample is not strong in explaining stock returns.The long-short hedging portfolio constructed by the ownership concentration in the non-state-owned sample can bring positive cross-sectional returns and excess returns.Second,the ownership concentration of natural persons as the largest shareholder can explain the expected return of the stock cross-section stronger than that of institutional investors.Third,the ownership concentration of listed companies in the three industries of agriculture,forestry,animal husbandry,fishery,manufacturing and social services can significantly predict stock returns.Fourth,in the non-state-owned sample,high beta stocks can use the ownership concentration factor to construct a longshort hedging portfolio strategy;the ownership concentration premium effect of largecap stocks is stronger than that of small-cap stocks;the ownership concentration premium effect of value companies is stronger for growth companies.Fifth,starting from the mispricing theory under the framework of behavioral finance,this paper explores the forecast source of ownership concentration on stock returns,and finds that the excess returns brought by high ownership concentration levels may be mispricing caused by valuation uncertainty.Finally,investors can use ownership concentration level as a factor to construct investment portfolios when formulating stock selection strategies.In particular,when investing in non-state-owned enterprises and enterprises whose largest shareholder is a natural person,consideration should be given to the ownership concentration of different listed firm characteristics and the correlation of stock returns.In addition,when investing in listed companies in agriculture,forestry,animal husbandry,fishery,manufacturing and social services,ownership concentration has a prominent ability to explain stock returns. |
