Summary

This dissertation contains three studies on empirical asset pricing. Each study is motivated by a post-2000 development: the increasing concentration of stock markets, the growing role of institutional investors, and the widespread adoption of factor-based investing. The first study shows how stock market concentration affects asset pricing through the channel of capital misallocation. It finds that changes in capital misallocation between superstar firms, which dominate stock markets by their size and market power, and non-superstar firms are negatively priced in the cross-section of stock returns. The second study shows how financial intermediaries affect asset pricing through the lens of a demand system. It finds that hedge funds’ asset demand exerts a stronger price impact precisely when broker-dealers’ balance-sheet constraint (leverage) is binding. The third study examines the overlapping effect of characteristic-based factor strategies. It finds that the portfolio of stocks overlapped in multiple factors is priced in the cross-section, while the portfolio of all pure factor stocks is not priced. Together, the chapters examine how stock market concentration, institutional demand, and factor overlap link to frictions that shape asset pricing and generate risk premia.