Objective: To find out who the average and marginal investors in the company are. This is relevant because risk and return models in finance assume that the marginal investor is well diversified.

Key Questions:

• Who is the average investor in this stock? (Individual or pension fund, taxable or taxexempt, small or large, domestic or foreign)

• Who is the marginal investor in this stock?

Framework for Analysis 1 Who holds stock in this company?

• How many stockholders does the company have?

• What percent of the stock is held by institutional investors?

• Does the company have listings in foreign markets? (If you can, estimate the percent of the stock held by non-domestic investors)

2 Insider Holdings

• Who are the insiders in this company? (Besides the managers and directors, anyone with more than 5% is treated as an insider)

• What role do the insiders play in running the company?

• What percent of the stock is held by insiders in the company?

• What percent of the stock is held by employees overall? (Include the holdings by employee pension plans)

• Have insiders been buying or selling stock in this company in the most recent year?

Getting Information on Stockholder Composition Information about insider and institutional ownership of firms is widely available since both groups have to file with the SEC. These SIC filings are used to develop rankings of the largest holders of stock in firms. Insider activity (buying and selling) also recorded by the SEC, though the information is not available until a few weeks after the filing.

Online sources of information:

http://www.stern.nyu.edu/~adamodar/cfin2E/project/data.htm