Study Finds Institutions Buy More Issues over the Counter

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Study Finds Institutions Buy More Issues Over the Counter

Institutional investors have trimmed the proportion of their holdings of New York Stock Exchange equities and stepped up their holdings of over-the-counter issues, according to a study by the Wharton School of the University of Pennsylvania.

As a consequence, the study concluded, while the Big Board continues to dominate the market, its role at the institutional level "has been decreasing somewhat.' The findings counter what the authors call "the feeling that the New York Stock Exchange's dominance of the market was, if anything, increasing.'

While banks' holdings of over-the-counter stocks increased, their appetite for over-the-counter issues was smaller than that of other institutional investors.

The study added that institutions as a group plan to increase or at least maintain their relative over-the-counter holdings in the near future.

The study, by professors Irwin Friend and Marshall Balume, was funded by the National Association of Securities Dealers, which runs the over-the-counter market.

According to the study, the proportion of institutional investors' equity holdings in Big Board stocks declined from 93.2% in 1979 to 90.3% in June 1985.

The American Stock Exchange's share was unchanged at 1.3%. But the proportion of other stocks, primarily over-the-counter issues, rose from 5.5% to 8.4%, according to the study, which is titled, "Recent and Prospective Trends in Institutional Ownership and Trading of Exchange and Over-the-Counter Stocks.'

The holdings were measured by market value. The institutions surveyed had at least $100 million worth of common stocks.

Mr. Blume commented that "investors today understand the advantages of diversification,' and that over-the-counter stocks offer "a new vehicle' for this. …