More than two-thirds of the $25 trillion of financial assets held in the United States is managed on behalf of investors by financial intermediaries, ranging from trusts, mutual funds, and mortgage pools to insurance companies, pension funds, and banks. Because of their importance, governments...

This paper assesses the effects of insurance and capital requirements on assets' equilibrium returns in a capital-asset-pricing model in which intermediaries possess better information than the public about the yields on a set of assets. Equilibrium returns depend on two risk premiums that...