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.
I mean at what price did the current stock holders got/bought their stocks.
Someone could download a dump of the whole thing (the SEC has a link and updates it every night) and assemble all of the various documents in a way to get a decent estimate.
An example Form 4 (which will show cost basis of acquisitions):
https://www.sec.gov/Archives/edgar/data/1045810/000104581025...
An example Form 144 (which would give you a pretty good guess as to which shares are being sold; you can then correlate with a known Form 4):
https://www.sec.gov/Archives/edgar/data/1045810/000192109425...
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
I don't consider they serious, because they could buy penny stocks, which are unregulated and are very frequent target for fraud.
> pensions, mutual funds
Funds are better than individuals, because usually they have some strategy and hiring professionals to control things, but they also prone for mistakes.
It's just a measure of liquidity. A stock can trade 1$ or 0$ per day and still have a market cap of 300B ( see private eq.)
(Maybe you are onto something, if stock iliquid, they got stocks at 0. If stock very liquid they got stocks at actual price.)
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...
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...
Perhaps you value those shares at $1000 on your balance sheet as their "book value" or "cost basis" or whatever, but the $1000 doesn't exist (you gave it to me), all you have is shares.
When you add large amounts of liquidity, you get proportional inflation/devaluation destroying the money you have added.
Covid Stimulus and related inflation showed how they economy cant even handle hundreds of billions more liquidity in the hands of consumers, let alone tens of trillions. The worker productive capacity doesn't exist to make and sell more stuff, so stocks and real-estate soak up as much liquidity as they can, and inflation takes the rest.
If the money in circulation doubled tomorrow, I would expect rent and eggs to double as well, because there isnt actually more stuff. In this way, excess liquidity and associated inflation heavily favors holders of debt, equity, capital, and real-estate.
As a well off American, I expect I would be the winner. My house dollar value of my house and 401k would double, while my mortgage would stay the same.
Cash is different than realized value, as anyone who has watched their cash inflate away will tell you as they use it for kindling.
Similarly, money tied up in the stock market doesn't mean it could be used in the economy. In many ways, the economy is not money limited and adding more does nothing.
Also, there's many times where the cost basis is stepped up, for example when someone dies and passes on assets to their beneficiaries. In this case the cost basis changes from what the dead person paid for it to what the beneficiary gets it for upon inheriting it.
Overall, I don't think this is a useful measure of anything though. What you might be interested in is the volume weighted average price, which gives an idea on how much people have paid on a stock in a recent window, based on the volume of trades and the price of those trades, reflecting what the average buyer's cost basis could be around.
This would be useful to know how much outstanding capital gains could be paid, if we removed the step up.
It's pretty complicated, look up the Secure Act 2.0 for some of the recent changes to try to get more taxes out of retirement accounts.
I think this approach most realistic, because it use very simple and easy to get input data and don't need sophisticated logic to separate debts.
Unfortunately, I remember statistic S&P from 2008, from all NASDAQ only Microsoft had fully 100% coverage of all debts (so AAA rating), not just 1 year of percents as all others.
For other things exist commodities exchange, etc. Just calculate sum of all exchanges and will got good enough approximation.
And I don't think it is worth to use more deep logic, because will need to spend much more time and resources to gather data, and will achieve basically same, but delayed to few months or more.
Only exclude, it may worth to get somewhere survey of households economy, as they are much more conservative than business, so data from 3-5 years ago will be good enough for first look.
https://www.macrotrends.net/stocks/charts/NDAQ/nasdaq/net-wo...
Those are all very concrete reasons for valuations
As well, micro-fluctuations in APY driven by stock price values create inconsistent hopes: a dividend investor that will "never" sell should hope that stock prices do not exceed inflation so that APY is stable or goes up, while most people hope that stock prices inflate with the economy or go up so that appreciation can be realized at sale.
Then there are the people who bought at IPO, at which the closest thing to a true valuation exists: it is at the IPO cost basis that a true value is established. IPO is also where the company performance becomes coupled to the stock price as the general public invests money into the company in the sale, and employees with stock options become incentivized to exercise any available control over the stock price, including increasing company performance.
I think there is a continuum between dividend investors and stock price speculators, and there is also some kind of monotonically devolving continuum from a rational value basis into chaotic market forces. In one corner of this N-dimensional continuum, I can definitely agree with you.
If someone has 50% of say Google from the start, them selling it all over say 5 years would put the cost basis way up, but without changing much in the economy or in those companies.
They would probably in turn buy other stocks and increase their cost basis.
Interesting Q though!
My advice on approach would be that you should consider it as a big auction house with many items, if you remove the items you're still left with the house, what's the value of the house ? There can be different approaches, yet there can't be a repetitive answer.
Price stocks were bought at is hard to calculate, but someone suggested liquidity as a proxy.
Price stocks bought at on primary market is interesting but probably irrelevant.
All the brokers and individuals logged into trading platforms enter the prices at which they wish to execute a buy or sell.
The system matches buyers to sellers, and that creates a pressure which moves the price this way and that way.
Firstly, consider the situation when there is a disparity between the prices: most asking prices are too high relative to bids, the volume of trading will be low. In this situation, sellers who want to get rid of the stock are motivated to drop their prices. Or, alternatively, if the market believes the stock has good near term prospects, the buyers have to raise their bids. Raised bids cause upward pressure on the price, lowered asks downward pressure. (No brainer!)
(You can see a big spread in bid/ask prices after hours when an exchange is closed. After hours trading is possible. If you want to buy and have that execute, you have to specify at least the asking price. Otherwise your bid will just be added to the others that are sitting there, waiting. After-hours trading volumes are significantly lower, which is associated with the wide bid/ask spread.)
When people execute market orders, that also moves the price. Selling something at market order means you urgently want to sell at whatever price is current. That means that your asking price will be lowered in order to meet a bidder.
Short-selling activity can drive a price down. And of course, short selling is motivated by the belief that a stock is about to tank or tanking. Under short selling, someone borrows a stock and sells it right away, hoping to buy it back at a lower price. They sell it ASAP because they believe they are buying a tanking stock, so they faster they sell it, the more money they will fetch, and the bigger will be their take when they buy it back. Short selling, I think, typically uses market orders, and so thereby exerts downward pressure. When bad news about a company invites short sellers, that can accelerate the drop in the stock price.
Anyway the end of the day, the price is the result of psychology, plus a few fundamentals of the stock like company earnings and whatnot. People have beliefs about which way something will go, and that effects their buying and selling behavior. The prices come from all the individual trades.
Ask yourself, what caused the Beanie Baby craze? What was the cost basis for someone paying $200 for a stuffed toy? Simply the belief that someone will later pay them $300, together with a casual dismissal of the risk that they will not even get back their $200 --- why, because they are in the middle of a craze that is obviously going to go on longer than the time scale of their intended action!
Key Challenges in Defining "Cost Basis" for the Market Diverse Ownership Structures:
Stocks are owned by individuals, institutions (pensions, mutual funds, hedge funds), governments, and foreign entities. Each group buys/sells stocks at different times and prices. Even within individual stocks, ownership is fragmented across millions of buyers with varying entry points. Dynamic Pricing:
Stock prices fluctuate constantly. A stock’s current price ($X today) does not reflect the average price paid by all current holders. For example: Some holders bought at 10,othersat50, and still others at $100. New buyers enter at today’s price, while existing holders may have held for decades. No Centralized Tracking:
There is no system to aggregate all historical purchase prices for every stock. Exchanges track trades, but not individual investor purchase histories. Alternative Metrics That Approximate "Cost Basis" While no single number exists, here are related concepts that might shed light:
1. Market Capitalization (Market Cap): Definition: Current stock price × total outstanding shares. Use: Reflects the market’s valuation of a company or the entire market (e.g., S&P 500 market cap). Limitation: Not a cost basis—it measures today’s value, not what investors paid. 2. Average Purchase Price for Index Funds: For passive investors (e.g., S&P 500 funds), cost basis depends on when they bought. Example: A fund using dollar-cost averaging buys more shares during downturns and fewer during rallies, lowering its average cost basis over time. Data for major index funds (e.g., Vanguard S&P 500 ETF) is public but only applies to specific funds, not the entire market. 3. Book Value: Definition: A company’s historical cost of equity minus depreciation/amortization (for accounting purposes). Use: Reflects the book value of shareholders’ equity, not the average price paid by investors. Example: If a company issued stock at 10pershareandneverrepurchasedshares,itsbookvaluemightbe10/shares, but current market value could be $50/shares. 4. Average Price Paid by Retail Investors: Surveys (e.g., by brokerage firms) occasionally estimate this for specific stocks or sectors. Example: A study might find that retail investors bought Tesla stock at an average price of $800/share over the past year. Limitation: Data is sparse, skewed toward recent activity, and not comprehensive. Why This Matters (or Doesn’t) For Individual Investors: Your personal cost basis matters for tax calculations (e.g., capital gains/losses). For the Market: The collective "cost basis" of all holders has no direct economic significance. What matters is: Current Valuation: How much the market values companies today. Market Sentiment: Investor psychology driving prices up or down. Fundamentals: Earnings, growth, debt, etc. Final Takeaway There is no single "actual cost basis" for the entire U.S. stock market. If you’re asking this question out of curiosity about market valuation, focus on metrics like market cap, P/E ratios, or index performance (e.g., S&P 500 history). For personal financial planning, track your own cost basis for individual stocks using brokerage records.