Sales of the asset by portfolio insurers will lead to lower prices, but if Tc(p°) is not known in other words, if investors do not know the proportion of sales that are "mechanical" responses to lower prices price falls will be greater "as a consequence of investors inferring information from prices. A supply shock leads to lower prices, which in turn (since the shock is unobserved) leads uninformed investors to revise their expectations downward. This limits these investors' willingness to absorb the extra supply and causes a magnified price response" (Gennotte and Leland 1990, p. 1001).

Donald MacKenzie, An Engine, Not a Camera, loc. 869