Recovering Price Informativeness from "Nonfundamental" Shocks

We measure price informativeness (PI) based on price recovery from supply shocks using mutual fund fire sales. Incomplete observability of shocks suggests a rational-expectations view: investors learn which of fundamentals or supply drive price pressures they see together with their private information. In equilibrium, PI flows with the square of the private information flow, a deterministic, nondecreasing but otherwise arbitrary function. The main result is a formula that recovers this function from the quadratic variation of returns on shocked firms using intraday data. This procedure produces curves of PI for each shock. Since the late 90s prices have revealed less information more slowly (PI's slope and curvature) while fundamental uncertainty has declined (level). Crises coincide with sudden stops and equally fast rebounds in the PI flow when they end. Size and liquidity largely determine the shape of PI across firms, yet are of vanishing importance over the last decade.