Essays on financial market frictions and imperfections

This paper examines the under-diversi cation widely exhibited by investors by analysing the rm characteristics that drive the average portfolio concentration of shareholders across stocks. The analysis uncovers systematic variation whereby the average portfolio weight of a stock increases with rm-speci c risk and value uncertainty as evidenced by a higher average weight in stocks with higher past return volatility, no analyst coverage and less synchronous price movements. Positive future earnings surprises are also characteristic of stocks with higher average portfolio weights. The ndings suggest that information advantages are signi cant contributing factors to the portfolio choices of investors. JEL Classi cations: G11.