What Happens with More Funds than Stocks? Analysis of Crowding in Style Factors and Individual Equities

Vol. 19, No. 2, 2021

Ananth Madhavan, Aleksander Sobczyk and Andrew Ang

The proliferation of funds juxtaposed against the decline in individual stock listing since the mid-1990s raises questions about crowding in individual stocks or style factors. We examine these issues by characterizing the common components of funds from 2007 through 2018. A key difference from the previous literature on common factors in fund returns is that we explicitly look at fund holdings over time for all US-listed equity active mutual funds
and exchange-traded funds and contrast their differences. We also explore the implications of this proliferation in funds for the pricing of individual securities and funds.