Review of Economic Studies Vol. 92 No. 3 2025
Market Power and Price Informativeness
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.
- DOI
- 10.1093/restud/rdae077
- Volume
- 92
- Issue
- 3
- Pages
- 1955-1986
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref