Rules meant to limit risk now make big stocks cheaper than they should be

Regulatory limits on how much of one stock a fund can own are now actively forcing fund managers to sell their largest holdings. This makes those funds perform worse and artificially lowers the prices of the biggest, most popular stocks.

Everyone assumed market concentration was just about big companies getting bigger. This paper shows that old rules meant to limit risk are now actively distorting prices for the largest companies. It means some of the most popular stocks are cheaper than they should be, not because investors do not want them, but because fund managers are legally prevented from buying more.