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SUMMARY:How Competitive is the Stock Market? Theory\, Evidence from Portfo
 lios\, and Implications for the Rise of Passive Investing
DTSTART:20220311T160000
DTEND:20220311T173000
DTSTAMP:20260428T004824Z
UID:fd1bfc67aa46024fb62c548250862817f2aae4218422e66c5e90077b
CATEGORIES:Conferences - Seminars
DESCRIPTION:Valentin Haddad\, UCLA\nWe develop a framework to theoreticall
 y and empirically analyze investor competition in financial markets. The c
 lassic view assumes that markets are very competitive: if a group of inves
 tors changes its behavior\, other investors react such that nothing happe
 ns in equilibrium. Our framework quantifies the strength of the competitiv
 e response. We estimate a demand system of institutional investors in the 
 US stock market accounting for two layers of equilibrium: how investors c
 ompete with each other in setting their strategies and how prices adjust t
 o clear asset markets. We find that investors react to the behavior of oth
 ers in the market: when an investor is surrounded by less aggressive trade
 rs she trades more aggressively. This reaction reduces the equilibrium co
 nsequences of changes in individual behavior by 50%. However\, it also imp
 lies that the stock market is far from the competitive ideal. A consequenc
 e of this result is that the large increase in passive investing over the
  last 20 years has led to substantially more inelastic aggregate demand cu
 rves for individual stocks\, by 15%. 
LOCATION:Zoom
STATUS:CONFIRMED
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