Paper: arXiv 2503.17778

Authors: Matteo Milazzo, Federico Musciotto, Jyrki Piilo, Rosario N. Mantegna

Abstract

We study the long term dynamics of the stock portfolios owned by single Finnish legal entities in the Helsinki venue of the Nasdaq Nordic between 2001 and 2021. Using the Herfindahl-Hirschman index as a measure of concentration for the composition of stock portfolios, we investigate the concentration of Finnish household portfolios both at the level of each individual household and tracking the time evolution of an aggregated Finnish household portfolio. We also consider aggregated portfolios of two other macro categories of investors one comprising Finnish institutional investors and the other comprising foreign investors. Different macro categories of investors present a different degree of concentration of aggregated stock portfolios with highest concentration observed for foreign investors. For individual Finnish retail investors, portfolio concentration estimated by the Herfindahl-Hirschman index presents high values for more than half of the total number of retail investors. In spite of the observation that retail stock portfolios are often composed by just a few stocks, the concentration of the aggregated stock portfolio for Finnish retail investors has a portfolio concentration comparable with the one of Finnish institutional investors. Within retail investors, stock portfolios of women present a similar pattern of portfolios of men but with a systematic higher level of concentration observed for women both at individual and at aggregated level.

Complexity vs Empirical Score

  • Math Complexity: 2.5/10
  • Empirical Rigor: 8.0/10
  • Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper leverages a highly unique, comprehensive 20-year Euroclear Finland dataset to perform a strong empirical analysis on portfolio concentration and market participant heterogeneity. While mathematically simple (focusing on Herfindahl-Hirschman Index and Lorenz curves), its empirical depth and empirical insights into household trading behaviors make it valuable.

Research Flowchart

  flowchart TD
    A[Research Goal: Analyze Household Stock Portfolio Concentration & Dynamics in Finland 2001-2021] --> B[Data Inputs: Nasdaq Nordic Helsinki Venue Ownership Data for Household, Institutional & Foreign Investors]
    B --> C[Methodology: Calculate Herfindahl-Hirschman Index HHI for Individual & Aggregated Portfolios]
    C --> D[Time Evolution Analysis: Track Portfolio Concentration Changes Over Time & Across Demographics]
    D --> E[Outcome 1: Foreign Investors Have Highest Aggregated Portfolio Concentration]
    D --> F[Outcome 2: Retail Investors Show High Individual HHI, but Aggregated Concentration Matches Institutions]
    D --> G[Outcome 3: Female Retail Investors Exhibit Systematically Higher Concentration Than Men]