OBVIOUS tag, where are you?

An interesting research paper has just hit the Physics Arxiv.

Now James Glattfelder and Stefano Battiston at the Swiss Federal Institute of Technology in Zurich have included these factors in a study of the control and ownership of stockmarkets in 48 countries around the world. Their results are startling.

It turns out that the insight gained from a simple network analysis -that ownership and control is distributed over large numbers of people-is entirely misleading. When other factors are included, such as the way ownership changes as shares are bought and sold, it turns out that stock markets are controlled by a very small number of companies.

OK, fine. There’s a secret cabal of companies manipulating the stock market, blah blah… then they show us the top ten list.

The Capital Group Companies

Fund manager

Fidelity Management & Research

Enormous fund manager

Barclays PLC

Owns BGI, one of the world’s biggest fund managers

Franklin Resources

Parent company of Franklin Templeton, an enormous mutual fund manager

AXA

Fund manager alongside its insurance business

JPMorgan Chase

Market maker bank

Dimensional Fund Advisors

One of the world’s biggest index fund managers

Merrill Lynch & Co

Market maker bank

Wellington Management Company

Fund manager

UBS

Market maker bank

O M G. They’ve just discovered that funds managers and market-maker banks own a lot of shares! What a scandal! Even Barclays, which might look kind of banky on the face of it, is there by merit of its Barclays Global Investors subsidiary.

What really grinds my gears, though, is the editorialising at the bottom:

These are the companies that control the global stockmarket. That’s a frightening thought. What it suggests is that the stability of the complex networks that make up our economy is hugely dependent on the ongoing survival of just a handful of companies.

We’re entitled to ask whether they’re up to the job. Recent experience suggests not.

Now this is utter crap. Of course funds managers hold a lot of shares – that’s what they’re paid to do. It doesn’t mean that they’re an evil cabal that’s secretly manipulating the markets, or that they’re a bunch of incompetent clowns who will collapse from an excess of liabilities.

(I’m probably being a bit harsh on the paper here. It looks like it’s some genuinely interesting topological mathematics, and it’s a useful application to finance. But the editorialising was just unnecessary.)

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