Market Macrostructure: Institutions and Asset Prices

Market macrostructure studies the broad organization of financial markets into key players and institutional features and how this organization affects the level and dynamics of asset prices. We present a simple model to discuss when, why, and how market macrostructure matters for asset prices. We then review work on three specific examples: the rise of passive investing in the stock market, the increased role of central banks in bond markets through asset purchase programs, and the role of levered financial intermediaries in financial markets. We highlight various approaches to tackling macrostructure questions including quasi-natural experiments, equilibrium models, and the use of detailed quantity data on asset positions.