O. Bohren et D. Michalsen, CORPORATE CROSS-OWNERSHIP AND MARKET AGGREGATES - OSLO STOCK-EXCHANGE1980-1990, Journal of banking & finance, 18(4), 1994, pp. 687-704
Corporate cross-ownership results in double counting of assets in the
market's valuation of total equity. This paper is the first to use fir
m-specific data to measure the resulting bias in market capitalization
, market portfolio return, capital structure, and the P/E ratio. Based
on the population of firms on the Oslo Stock Exchange, we found subst
antial distortions of market aggregates: The average size of the equit
y market was overstated by 20%, financial leverage was underestimated
by 7%, and the market portfolio return was underestimated by 31%. Doub
le counted earnings offset the bias in market capitalization, leaving
the P/E almost undistorted.