Democratizing Private Markets: Equilibrium Predictions

Pástor, Luboš, Robert Stambaugh and Lucian Taylor
Authors registered in the RePEc Author Service: Lubos Pastor

No 21892, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study how opening private markets to retail investors affects investors and firms. Calibrating a production-based asset-pricing model, we find that democratization raises retail investors' welfare, but barely. Retail investors benefit little from democratization even if they face no extra cost or other disadvantage relative to institutional investors. The private market is simply too small for improved diversification to matter much. Democratization affects firms more than investors---it substantially reshapes private firms' ownership, temporarily reduces their cost of capital, and induces a large expansion of private capital. Private equity earns a positive CAPM alpha, which shrinks after democratization.

Keywords: Democratization (search for similar items in EconPapers)
JEL-codes: G11 G12 G18 G23 (search for similar items in EconPapers)
Date: 2026-08
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP21892 (application/pdf)

Related works:
Working Paper: Democratizing Private Markets: Equilibrium Predictions (2026)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:21892

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP21892

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().