More Stock Funds Than Stocks?

What does it mean when the number of stock funds exceeds the number of stocks they hold? In their October 2019 paper entitled “What Happens with More Funds than Stocks?”, Ananth Madhavan, Aleksander Sobczyk and Andrew Ang tackle this question by examining holdings over time for all U.S. active equity mutual funds and equity exchange-traded funds (ETF). The look at commonalities and differences across all funds and between mutual funds and ETFs, including dominant equity factor exposures. Using quarterly holdings of all U.S.-listed U.S. equity mutual funds and ETFs during January 2007 through December 2018, they find that:

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