Market Power and Price Informativeness

Marcin Kacperczyk, Jaromir Nosal and Savitar Sundaresan

The Review of Economic Studies, 2025, vol. 92, issue 3, 1955-1986

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.

Keywords: Price informativeness; Asset markets; Efficiency; Information production (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:92:y:2025:i:3:p:1955-1986.

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