Market Power and Informational Efficiency

Savitar Sundaresan, Jaromir Nosal and Marcin Kacperczyk
Additional contact information
Savitar Sundaresan: Columbia University

No 356, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: Levels and concentration of institutional equity ownership have been growing steadily over the last few decades raising concerns of potential market insta- bility. We study theoretically and empirically the consequences of changes in ownership structure for informational content of prices, on average and across assets with di↵erent characteristics. Our theoretical framework is a general equilibrium portfolio-choice model with endogenous information acquisition and market power. We show that, in the cross section, an increase in institutional (informed) ownership increases price informativeness, and an increase in con- centration of ownership leads to lower informativeness. We confirm similar e↵ects in the data of U.S. stocks over the period 1980-2015. The policy ex- periments of changing ownership structure indicate a non-monotonic relation between the levels and concentration of ownership and price informativeness. We conclude that any policy targeting ownership structure should factor in its e↵ects on welfare through price informativeness.

Date: 2017
New Economics Papers: this item is included in nep-com and nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2017/paper_356.pdf (application/pdf)

Related works:
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:red:sed017:356

Access Statistics for this paper

More papers in 2017 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().