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The New York Innovation Center bridges the worlds of finance, technology, and innovation and generates insights into high-value central bank-related opportunities.
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September 2022 Revised July 2025
JEL classification: D82, G14, G23
Authors: Doruk Cetemen, Gonzalo Cisternas, Aaron Kolb, and S. Viswanathan
We propose a theory of coordination and influence among blockholders. Privately informed activists time their trades in sequence to lower acquisition costs, prompting a strategic use of order flows. Leader activists create trading gains for their followers, ultimately influencing their willingness to bear greater value-enhancing intervention costs. Through this channel, informed trades can exhibit predictability, in sharp contrast with Kyle (1985). We explain how this novel predictability shapes free-rider problems affecting governance, and how it produces price abnormalities analogous to those documented empirically. We also uncover how private information interdependence can be a key catalyst for the mechanism studied.
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Gonzalo Cisternas
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Aaron Kolb
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
S. Viswanathan
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
