[HN Gopher] Ask HN: What is the actual cost basis of the stock m...
___________________________________________________________________
Ask HN: What is the actual cost basis of the stock market?
Does anyone know what is the actual cost basis for the entire US
stock market. I mean at what price did the current stock holders
got/bought their stocks.
Author : whatever1
Score : 10 points
Date : 2025-03-10 19:52 UTC (3 hours ago)
| s1artibartfast wrote:
| I dont think anyone has that data. Individual companies dont have
| a record of who owns their stock and what they bought it at. Even
| individual owners sometimes dont know their own cost basis, let
| alone their broker or some centralized authority. This is further
| complicated by the fact that >50% of trades now occur outside of
| exchanges [1]
|
| You might be able to estimate a similar attribute by looking at
| IPO history and additional primary offerings, but that also has
| major challenges. It doesn't include pre-IPO owners that retain
| stake, buybacks, ect. What is Zuckerberg's cost basis in Meta?
|
| Interesting question though....
|
| https://www.bloomberg.com/news/articles/2025-01-24/wall-stre...
| whatever1 wrote:
| I don't even directionally have an idea how much is it. Is it
| like 80% of the current total market value or 8%? My back of
| the envelope math plus very coarse assumptions lead me closer
| to 80%.
| s1artibartfast wrote:
| To be clear, you are talking about the aggregate for the
| current holders, understanding that actual cost basis will be
| different for every person with stock? Some people will have
| long invest duration with tiny cost basis, some will have
| cost basis over 100%.
|
| My ballpark guess is less than 80%. Most of the stock market
| is owned by households, either directly through equities, or
| indirectly through mutual funds and pensions [2, p14]
|
| Most individuals and pensions are long term positions, with
| buying and selling to increase or decrease a position, not
| buying or liquidating entire portfolios.
|
| If I guess the average hold time is ~5 years, that would be a
| about a 60% basis.
|
| US total stock market cap in feb 25' was 67 Trillion, Total
| market cap in feb 20' was 40 trillion. [1]
|
| What conclusion are you trying to draw from it? From an
| individual perspective, I care more about my cost basis in my
| market account, than the cost basis for an individual stock.
| I might have a 95% cost basis my current holding, but a 5%
| cost basis for my entire account(what I put in the market)
|
| https://focus.world-
| exchanges.org/issue/february-2020/market...
| https://www.sifma.org/wp-content/uploads/2019/10/SIFMA-
| Insig...
| gizajob wrote:
| I'd hazard that average hold time is much shorter. What
| makes you say 5 years? My gut tells me that the majority of
| stocks are held by whales moving them in and out on a
| constant basis nowadays.
| whatever1 wrote:
| I am trying to understand how much the stock market can
| drop before we destroy realized value (cash). Or how much
| money is not used in the economy, but rather it is tied to
| the stock market.
| o_nate wrote:
| That is an interesting question. I guess one way to approximate a
| very rough, back-of-the-envelope type of answer would be to look
| at the average daily dollar volume traded and the total market
| capitalization. So for instance with the Nasdaq we have approx.
| $30 trillion in market cap and approx. $400 billion of average
| daily volume, a factor of 75. So in the best-case situation where
| each share trades exactly once, it would take approx. 75 trading
| days for the market to turn over once. However, let's take a more
| pessimistic assumption (though probably still not pessimistic
| enough) that shares are selected randomly to trade. We can use
| the classic ball-and-bins type of probability to estimate how
| many days it would take until let's say 95% of dollar value had
| turned over at least once, which produces an estimate of roughly
| 225 trading days, so let's round it up to 1 trading year (these
| are very rough estimates). So then assuming that roughly 95% of
| the Nasdaq market cap has turned over in the past year, then the
| average market cap over the past year is not a bad ball-park
| estimate of the cost basis. (I invite any real mathematicians out
| there to tell me where I went wrong.)
| whatever1 wrote:
| My fear in such calculations is that we leave the big whales
| that do not move, outside. For example the CEO of Nvidia has 4%
| Nvidia that in today's value is 160B, but the basis is from the
| IPO, so more like $40M. So now our back-of-the envelope
| calculation is 160B off.
| s1artibartfast wrote:
| I dont think your pessimistic scenario is nearly slow enough.
| There is a large buy and hold component of the market, with
| high frequency trading on the margin.
|
| The random sale model doesn't account for pensions, mutual
| funds, and individuals that hold. Where would firms like
| Berkshire Hathaway fit into this model?
|
| I imagine the distribution of stock hold duration is
| nonlinear/logarithmic
| blackeyeblitzar wrote:
| One way to look at this is to look at the valuation of each
| company at the time of IPO, and see where it is now. Stock
| changed hands but you could think of growth relative to when the
| public could trade that stock. It's not perfect - just an idea.
___________________________________________________________________
(page generated 2025-03-10 23:02 UTC)