Market power and price informativeness
File(s)
Accepted version
Author(s)
Kacperczyk, Marcin
Nosal, Jaromir
Sundaresan, Savitar
Type
Journal Article
Abstract
We study the distributional effects of asset ownership on price informativeness in a general equilibrium model. The model features investors (oligopolists) with different degrees of price impact and abilities to learn about individual asset payoffs from private and price signals, and a competitive fringe that only learns from asset prices. We show that price informativeness is non-monotonic in the oligopolists’ aggregate size, decreasing in the sector’s concentration and in the size of the passive sector. We further show that the size effect can be decomposed into a learning channel capturing investors’ quality of private signals and an information pass-through channel measuring the sensitivity of investors’ trades to private signals, with the latter one being the primary source of variation in price informativeness relative to the size distribution.
Date Issued
2025-05-03
Date Acceptance
2024-07-12
Citation
The Review of Economic Studies, 2025, 92 (3), pp.1955-1986
ISSN
0034-6527
Publisher
Oxford University Press
Start Page
1955
End Page
1986
Journal / Book Title
The Review of Economic Studies
Volume
92
Issue
3
Copyright Statement
© The Author(s) 2024. Published by Oxford University Press on behalf of The Review of Economic Studies Limited. All rights reserved. This is the author’s accepted manuscript made available under a CC-BY licence in accordance with Imperial’s Research Publications Open Access policy (www.imperial.ac.uk/oa-policy)
License URL
Publication Status
Published
Article Number
rdae077
Date Publish Online
2024-07-22