by Jan-Carl Plagge, Ph.D, Global Head of Indexing, Active and ESG Research & Head of Investment Strategy Group, APAC, and Ning Yan CFA, Senior Investment Strategist
With the US equity market having become more concentrated in the recent past, many investors are questioning what that may mean for future portfolio outcomes. Does a more concentrated market signal lower expected returns, greater volatility or a higher risk of significant drawdowns?
In this research paper, Ning Yan and Jan-Carl Plagge examine equity market concentration across 18 developed and emerging markets and test whether concentration has historically been linked to future returns and risk. Their findings challenge a common assumption: their research finds no systematic relationship between market concentration and future returns or the likelihood of major market declines.
For advisers navigating client concerns around concentrated markets, the paper provides an evidence-based perspective on what concentration may, and may not, mean for long-term investors.
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