Stock Market Concentration: How Much Is Too Much?

• Stock market concentration has increased sharply over the past decade, creating a challenging environment for active managers and also raising unease about the loss of diversification, the valuations of the largest stocks, and the effect of flows into index funds.
• In this report, we look at concentration over the past 75 years to see where we stand today and to reflect on what it means for active equity managers.
• We examine which companies have had the largest stock market capitalizations and how that population has changed.
• We ask whether there is a correct level of concentration, both by comparing the U.S. to other global markets and by presenting the possibility that concentration was too low in the past.
• We then seek to determine whether fundamental corporate performance supports the current increase in concentration.  
   

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