Journal of Economic Literature
ISSN 0022-0515 (Print) | ISSN 2328-8175 (Online)
Intermediaries and Asset Prices
Journal of Economic Literature
(pp. 876–906)
Abstract
Intermediary asset pricing posits that financial institutions play a central role in financial markets, and that their decisions shape asset prices beyond simply reflecting the preferences of the average household. This perspective helps make sense of key empirical patterns: the excess volatility of asset prices, differences in price movements across asset classes, the cross-section of expected returns within asset classes, and specific arbitrage opportunities and price dislocations. We also review the implications of intermediary asset pricing for macroeconomic dynamics, international economics,and policy. In this approach, a primary channel of financial regulation and monetary policy is through alleviating constraints or removing risk from intermediary balance sheets during periods of stress. We highlight both existing progress and gaps for future research.Citation
Haddad, Valentin, and Tyler Muir. 2026. "Intermediaries and Asset Prices." Journal of Economic Literature 64 (3): 876–906. DOI: 10.1257/jel.20251766Additional Materials
JEL Classification
- E44 Financial Markets and the Macroeconomy
- E52 Monetary Policy
- F31 Foreign Exchange
- G12 Asset Pricing; Trading Volume; Bond Interest Rates
- G18 General Financial Markets: Government Policy and Regulation
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G23 Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors