Which Investors Matter for Equity Valuations and Expected Returns?

Ralph Koijen, Robert Richmond and Motohiro Yogo

No 27402, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Based on an asset demand system, we develop a framework to quantify the impact of market trends and changes in regulation on asset prices, price informativeness, and the wealth distribution. Our leading applications are the transition from active to passive investment management and climate-induced shifts in asset demand. The transition from active to passive investment management had a large impact on equity prices but a small impact on price informativeness because capital did not flow from more to less informed investors on average. This finding is based on a new measure of investor-level informativeness that identifies which investors are more informed about future profitability. Climate-induced shifts in asset demand have a potentially large impact on equity prices and the wealth distribution, implying capital gains for passive investment advisors, pension funds, insurance companies, and private banking and capital losses for active investment advisors and hedge funds.

JEL-codes: G1 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-fmk
Note: AP
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Citations: View citations in EconPapers (22)

Published as Ralph S J Koijen & Robert J Richmond & Motohiro Yogo, 2024. "Which Investors Matter for Equity Valuations and Expected Returns?," Review of Economic Studies, vol 91(4), pages 2387-2424.

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Related works:
Journal Article: Which Investors Matter for Equity Valuations and Expected Returns? (2024)
Working Paper: Which Investors Matter for Equity Valuations and Expected Returns? (2020)
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