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Market Power and Price Informativeness

Author

Listed:
  • Marcin Kacperczyk
  • Jaromir Nosal
  • Savitar Sundaresan

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.

Suggested Citation

  • Marcin Kacperczyk & Jaromir Nosal & Savitar Sundaresan, 2025. "Market Power and Price Informativeness," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 92(3), pages 1955-1986.
    • Handle: RePEc:oup:restud:v:92:y:2025:i:3:p:1955-1986.
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    File URL: http://hdl.handle.net/10.1093/restud/rdae077
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