Have Stock Markets Changed?

Same old, same old, it seems.

September 2023. Reading Time: 10 Minutes. Author: Nicolas Rabener.


  • Trading technology continues to make the trading of stocks easier, cheaper, and faster
  • However, despite this and other financial innovations like ETFs, the US stock market structure hasn’t changed
  • Likely explained by the fact that its core participants are unable to change


Consider the following:

  • The average holding period for an individual stock in the US was 5 years in the 1970s, compared to 10 months as of today
  • Passive ETFs have become the largest shareholders in many stocks
  • High-frequency trading firms dominate the trading of stocks
  • The cost of trading has become essentially zero for institutional and retail investors
  • The Fed and other central banks try to be manage stock markets more actively
  • A single retail investor based in the UK has been able to cause a flash crash in the S&P 500

Given all these changes, there is frequent commentary that markets have changed. Value-focused fund managers moan that their investment style has stopped working. Bond traders complain that liquidity can evaporate in even the largest fixed-income markets during certain periods.

However, although there are constantly new innovations in financial markets, its core participants have barely changed and are still constantly shifting from fear to greed. Performance chasing is alive and well, unfortunately (read An Anatomy of Thematic Investing).

In this research article, we will evaluate if the market structure of the US stock market has changed.


There are many ways of analyzing the market structure of the US stock market, which can be dissected on micro and macro levels. We want to compare the market structure across decades, where long-term data is only available for the latter. Our primary data source is the library of Professor Kenneth R. French, which offers daily stock market returns for almost a century.

We kick of