Beware of Institutional Ownership Data from 13F filings

Beware of Institutional Ownership Data from 13F filings

July 22, 2016 Research Insights
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(Last Updated On: July 28, 2016)

The core source for institutional ownership data is derived from form 13F, which is a form filed by large asset managers that manage over $100mm in 13(f) securities (e.g., stocks). Here is a link to the 13(f) security lists.

Many academic studies and marketplace products/strategies rely on 13F filing to establish measures of so-called “institutional ownership.” The research that uses institutional ownership metrics to test an argument is interesting and often compelling, however, few readers ever question the data source that underlies “institutional ownership.” Could there be a case of “garbage in, garbage out” when it comes to this data?

My gut has always said, “Yes.” As a PhD grad student and a former finance professor, I used to be buried in the Thomson-Reuters Institutional Holdings (13F) Database, which is a collection of 13F files for all filers over time. The database is not a pretty sight–data errors are not rare, they are the norm. However, there are two possible reasons for the database issues:

  1. Thomson-Reuters is doing a bad job
  2. The underlying source data is no good

13F data stinks?

Turns out #2 might be the culprit. A new paper by Anne Anderson and Paul Brockman, appropriately titled, “Form 13F (Mis)Filings,” highlights the issues with the source 13F filing data submitted by  13F filers. The abstract says it all:

We examine the reliability of Form 13F filings and document the widespread presence of significant reporting errors…Overall, our evidence shows that the widespread reliance on 13F filings for institutional ownership figures is unwarranted.

Ouch. That is quite an indictment!

Here is a table from the paper highlighting the vast differences in shares reported on proxy statements (DEF 14a) and 13F–note the huge differences. Perhaps some of these can be easily explained, but the extraordinary differences are a bit startling…

Is this due to the fact State Street is a custodian versus Blackrock , which is an advisor/manager? What about beneficial ownership versus advisor control of 13F securities? h.t. Brad B. @ alphaclone)

So what’s the bottomline?

Perhaps we should follow the SEC’s own advice as it pertains to 13F filings:

The reader should not assume that information is accurate and complete.

Readers should make sure they understand their data provider who providers 13F data and also recognize that the underlying data provided to the SEC is not held to the same level of scrutiny as other filings (e.g., financial statement data).

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Definitions of common statistics used in our analysis are available here (towards the bottom)

About the Author

Wesley R. Gray, Ph.D.

After serving as a Captain in the United States Marine Corps, Dr. Gray earned a PhD, and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management that delivers affordable active exposures for tax-sensitive investors. Dr. Gray has published four books and a number of academic articles. Wes is a regular contributor to multiple industry outlets, to include the following: Wall Street Journal, Forbes,, and the CFA Institute. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.

  • Pasting a comment from Maz Jadallah on LinkedIn:
    “The paper is suspect to say the least. They confuse requirements for 13g, 14Ddef and 13f.”

  • I then responded as follows:
    Paul Brockman is a solid academic researcher with numerous top-tier publications: His reputation is pretty solid. Also, having worked with source 13F data in the past I have to agree with the general assessment that the data is not “fact checked” as hard as other data reported to the SEC. Regardless, I don’t think the message is that 13F data–or the services you provide–are worthless, users just need to be aware of the warts and problems show less

  • Maz response:
    “I don’t know him so I’ll take your word on his being solid but his conclusion was “widespread reliance on Form 13F for institutional ownership figures is unwarranted.” That’s just not borne out by the data or facts. The opposite is in fact true, “widespread reliance is warranted in large part but like any dataset quality issues exist.” Also, it would seem to me that the rules around when and as of when a security is reportable as being “owned” on proxies vs 13Gs vs 13Fs is central to his analysis. Yet he uses one as a proxy for the other – that’s a glaring error in my view.”