Free float is the share of a company not held by insiders, governments or other strategic owners. In a market-value index it decides two things: how much of a company the index holds and, through a minimum threshold, whether it is held at all. Because it is a percentage applied by rule, it is treated as a measurement. The paper argues it is better understood as an estimate built on judgements — and that a hard 15% line turns small differences in judgement into large differences in outcome.
The test case is Indonesia, where MSCI removed eight companies from its standard index in 2026 and has proposed moving the country to Standalone status. The paper applies the free-float rules of MSCI, FTSE Russell, S&P Dow Jones Indices and the Indonesia Stock Exchange to the shareholder register of 961 of the 962 listed companies.
Three uncertainties, one threshold
Definition. Applied to the same register, the four rule-sets place between 27% and 41% of the market's value below 15%. Companies holding nearly a fifth of the market's value pass under some rules and fail under others — a disagreement between defensible rules, not an error.
Information. The rules disagree most where more of a company is held in stakes between 1% and 5% — the band Indonesia began disclosing in March 2026. In a reconstruction that holds ownership fixed, seeing those holdings roughly doubles the share below 15% under the providers' rules, from about 17% to between 34% and 41%. Nothing changed in who owns what; only what could be seen.
Estimation. A simple error model implies that a two-point error in the float figure would leave some 40 companies on the wrong side of the line.
| Source of uncertainty | What moves | Size in Indonesia |
|---|---|---|
| Information | What owners must disclose — 5% stakes vs 1% stakes | Share below 15% roughly doubles, ≈17% → 34–41%, with no change in ownership |
| Definition | Which holders count as strategic — MSCI, FTSE Russell, S&P DJI, IDX | 27% to 41% of market value below the line; 248 companies change side |
| Estimation | Ordinary error in the float figure itself | A two-point error puts ≈40 companies on the wrong side of 15% |
What the threshold does downstream
Six of the eight companies MSCI removed remain in funds tracking other providers. Free float is informative about trading but, the paper finds, leaves most of its variation unexplained — it does not by itself measure how much of a stock can be traded. The paper shows how much a fund could trade in MSCI's nine-stock index and in broader alternatives, and sets out graded, company-level options for the consultation, which is open until 30 April 2027.
The paper also raises a hypothesis for further work: if more disclosure lowers measured float, and lower measured float lowers weights or triggers exclusion, then the markets that disclose most may be penalised first. The evidence describes associations and does not establish causes.
- Free float depends on the rule applied, the information available and estimation error; a 15% threshold converts each into membership decisions.
- Across MSCI, FTSE Russell, S&P DJI and IDX rules, 27–41% of Indonesia’s market value sits below 15%; 248 companies change side.
- Disclosing 1% stakes roughly doubles the share below 15% with ownership unchanged — disclosure reform alone can move a market’s classification.
- Rules that measure capacity directly, at company level, in published steps, are a proposition to test — not a finding of the paper.
Pal, M. (2026). Disclose More, Float Less: Free-Float Measurement and MSCI’s 2026 Review of Indonesia. AlphaBlock Working Paper 2026-04. https://doi.org/10.5281/zenodo.23626765.
This note is provided for information and discussion purposes only. It does not constitute investment advice, investment research, a recommendation, or an offer or solicitation to buy or sell any security or investment product, and it should not be relied upon for any investment decision. Views are drawn from the referenced paper as of its publication date and are subject to change without notice. Exhibits are illustrative unless otherwise stated and do not depict the performance of any actual portfolio; hypothetical and idealized results have inherent limitations and do not reflect actual trading. Past performance does not guarantee future results. AlphaBlock Technologies Inc. is a financial-technology licensor; regulated products are offered solely by licensed partners in their respective jurisdictions under their own documentation. © 2026 AlphaBlock Technologies Inc.