Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • December 2011
  • Article
  • Journal of Financial Economics

Stock Price Fragility

By: Robin Greenwood and David Thesmar
  • Format:Print
ShareBar

Abstract

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.

Keywords

Stocks; Price; Ownership; Risk and Uncertainty; Assets; System Shocks; Financial Liquidity; Forecasting and Prediction; Investment Return; Volatility; Relationships; United States

Citation

Greenwood, Robin, and David Thesmar. "Stock Price Fragility." Journal of Financial Economics 102, no. 3 (December 2011).
  • SSRN
  • Find it at Harvard
  • Read Now

About The Author

Robin Greenwood

Finance
→More Publications

More from the Authors

    • May 2022
    • Faculty Research

    Third Point in 2020: Growth is Where the Value is? (B)

    By: Robin Greenwood and Denise Han
    • May 2022
    • Faculty Research

    Third Point in 2020: Growth is Where the Value is?

    By: Robin Greenwood, James Williams and Denise Han
    • April 2022
    • Journal of Finance

    Predictable Financial Crises

    By: Robin Greenwood, Samuel G. Hanson, Andrei Shleifer and Jakob Ahm Sørensen
More from the Authors
  • Third Point in 2020: Growth is Where the Value is? (B) By: Robin Greenwood and Denise Han
  • Third Point in 2020: Growth is Where the Value is? By: Robin Greenwood, James Williams and Denise Han
  • Predictable Financial Crises By: Robin Greenwood, Samuel G. Hanson, Andrei Shleifer and Jakob Ahm Sørensen
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College