Why do demand curves for stocks slope down?

Journal of Financial and Quantitative Analysis

Volumn 44, Issue 5, 2009, Pages 1013-1044

  Petajisto, Antti ^a  

^a YALE SCHOOL OF MANAGEMENT   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 67549145779     PISSN: 00221090     EISSN: 17566916     Source Type: Journal    
DOI: 10.1017/S0022109009990317     Document Type: Article

References (55)

1. Admati, A. "A Noisy Rational Expectations Equilibrium for Multiple Asset Securities Markets." Econometrica, 53 (1985), 629-657.
2. Allen, F. "Do Financial Institutions Matter?" Journal of Finance, 56 (2001), 1165-1175.
3. Allen, F., and D. Gale. "Limited Market Participation and Volatility of Asset Prices." American Economic Review, 84 (1994), 933-955.
4. Amihud, Y., and H. Mendelson. "Asset Pricing and the Bid-Ask Spread." Journal of Financial Economics, 17 (1986), 223-249.
5. Barberis, N., and A. Shleifer. "Style Investing." Journal of Financial Economics, 68 (2003), 161-199.
6. Barberis, N.; A. Shleifer; and J. Wurgler. "Comovement." Journal of Financial Economics, 75 (2005), 283-317.
7. Barberis, N., and R. Thaler. "A Survey of Behavioral Finance." in Handbook of the Economics of Finance, G. M. Constantinides, M. Harris, and R. Stulz, eds. Amsterdam, The Netherlands: Elsevier (2003).
8. Berk, J. B., and R. C. Green. "Mutual Fund Flows and Performance in Rational Markets." Journal of Political Economy, 112 (2004), 1269-1295.
9. Berk, J. B., and R. Stanton. "Managerial Ability, Compensation, and the Closed-End Fund Discount." Journal ofFinance, 62 (2007), 529-556.
10. Biais, B.; P. Bossaerts; and C. Spatt. "Equilibrium Asset Pricing and Portfolio Choice under Asymmetric Information." Working Paper, University of Toulouse (2006).
11. Black, F. "Noise." Journal of Finance, 41 (1986), 529-543.
12. Chen, J.; H. Hong; M. Huang; and J. D. Kubik. "Does Fund Size Erode Mutual Fund Performance? The Role of Liquidity and Organization." American Economic Review, 94 (2004), 1276-1302.
13. Chen, J.; H. Hong; and J. C. Stein. "Breadth of Ownership and Stock Returns." Journal of Financial Economics, 66 (2002), 171-205.
14. Cohen, R.; P. Gompers; and T. Vuolteenaho. "Who Underreacts to Cash-Flow News? Evidence from Trading between Individuals and Institutions." Journal of Financial Economics, 66 (2002), 409462.
15. Cremers, M., and A. Petajisto. "How Active Is Your Fund Manager? A New Measure That Predicts Performance." Review of Financial Studies, 22 (2009), 3329-3365.
16. Daniel, K.; M. Grinblatt; S. Titman; and R. Wermers. "Measuring Mutual Fund Performance with Characteristic-Based Benchmarks." Journal of Finance, 52 (1997), 1035-1058.
17. Daniel, K.; D. Hirshleifer; and A. Subrahmanyam. "Overconfidence, Arbitrage, and Equilibrium Asset Pricing." Journal of Finance, 56 (2001), 921-965.
18. D'Avolio, G. "The Market for Borrowing Stock." Journal of Financial Economics, 66 (2002), 271-306.
19. De Bondt, W. F. M., and R. Thaler. "Does the Stock Market Overreact?" Journal of Finance,40 (1985), 793-805.
20. De Long, J. B.; A. Shleifer; L. H. Summers; and R. J. Waldmann. "Noise Trader Risk in Financial Markets." Journal of Political Economy, 98 (1990), 703-738.
21. Denis, D. K.; J. J. McConnell; A. V. Ovtchinnikov; and Y. Yu. "S&P 500 Index Additions and Earnings Expectations." Journal of Finance, 58 (2003), 1821-1840.
22. Elton, E. J.; M. J. Gruber; and C. R. Blake. "Incentive Fees and Mutual Funds." Journal ofFinance, 58 (2003), 779-804.
23. Fama, E. F., and K. R. French. "Disagreement, Tastes, and Asset Prices." Journal of Financial Economics, 83 (2007), 667-689.
24. Glosten L. R., and P. R. Milgrom. "Bid, Ask, and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders." Journal of Financial Economics, 14 (1985), 71-100.
25. Gomes, J.; L. Kogan; and L. Zhang. "Equilibrium Cross Section of Returns." Journal of Political Economy, 111 (2003), 693-732.
26. Greenwood, R. "Short- and Long-Term Demand Curves for Stocks: Theory and Evidence on the Dynamics of Arbitrage." Journal ofFinancial Economics, 75 (2005), 607-649.
27. Grossman, S., and M. Miller. "Liquidity and Market Structure." Journal of Finance, 43 (1988), 617-633.
28. Grossman, S., and J. E. Stiglitz. "On the Impossibility of Informationally Efficient Markets." American Economic Review, 70 (1980), 393-408.
29. Harris, L., and E. Gurel. "Price and Volume Effects Associated with Changes in the S&P 500 List: New Evidence for the Existence of Price Pressure." Journal ofFinance, 41 (1986), 815-829.
30. Holthausen, R. W.; R. W. Leftwich; and D. Mayers. "The Effect of Large Block Transactions on Security Prices: A Cross-Sectional Analysis." Journal ofFinancial Economics, 19 (1987), 237-267.
31. Holthausen, R. W.; R. W. Leftwich; and D. Mayers. "Large-Block Transactions, the Speed of Response, and Temporary and Permanent Stock-Price Effects." Journal ofFinancial Economics,26 (1990), 71-95.
32. Hortacsu, A., and C. Syverson. "Product Differentiation, Search Costs, and Competition in the Mutual Fund Industry: A Case Study of S&P 500 Index Funds." Quarterly Journal ofEconomics, 119 (2004), 403-456.
33. Jegadeesh, N., and S. Titman. "Profitability of Momentum Strategies: An Evaluation of Alternative Explanations." Journal ofFinance, 56 (2001), 699-720.
34. Kacperczyk, M. T.; C. Sialm; and L. Zheng. "On the Industry Concentration of Actively Managed Equity Mutual Funds." Journal ofFinance, 60 (2005), 1983-2011.
35. Kaul, A.; V. Mehrotra; and R. Morck. "Demand Curves for Stocks Do Slope Down: New Evidence from an Index Weights Adjustment." Journal ofFinance, 55 (2000), 893-912.
36. Kyle, A. S. "Continuous Auctions and Insider Trading." Econometrica, 53 (1985), 1315-1335.
37. Loderer, C.; J. W. Cooney; and L. D. van Drunen. "The Price Elasticity of Demand for Common Stock." Journal ofFinance, 46 (1991), 621-651.
38. Lynch, A., and R. Mendenhall. "New Evidence on Stock Price Effects Associated with Changes in the S&P 500 Index." Journal of Business, 70 (1997), 351-383.
39. Mamaysky, H., and M. Spiegel. "A Theory of Mutual Funds: Optimal Fund Objectives and Industry Organization." Working Paper, Yale School of Management (2001).
40. Merton, R. C. "A Simple Model of Capital Market Equilibrium with Incomplete Information." Journal of Finance, 42 (1987), 483-510.
41. Merton, R. C., and Z. Bodie. "Design of Financial Systems: Towards a Synthesis of Function and Structure." Journal ofInvestment Management, 3 (2005), 1-23.
42. Miller, R. M. "Measuring the True Cost of Active Management by Mutual Funds." Journal ofInvest-ment Management, 5 (2007), 29-49.
43. Mitchell, M.; T. Pulvino; and E. Stafford. "Price Pressure around Mergers." Journal ofFinance,59 (2004), 31-63.
44. Morck, R., and F. Yang. "The Mysterious Growing Value of S&P 500 Membership." Working Paper, NBER (2001).
45. Petajisto, A. "Why Do Demand Curves for Stocks Slope Down?" Working Paper, Yale University (2005).
46. Petajisto, A. "The Index Premium and Its Hidden Cost for Index Funds." Working Paper, Yale University (2008).
47. Rashes, M. S. "Massively Confused Investors Making Conspicuously Ignorant Choices (MCI-MCIC)." Journal of Finance, 56 (2001), 1911-1927.
48. Ross, S. "Institutional Markets, Financial Marketing, and Financial Innovation." Journal ofFinance, 44(1989), 541-556.
49. Scholes, M. "The Market for Securities: Substitution versus Price Pressure and the Effects of Information on Share Price." Journal ofBusiness, 45 (1972), 179-211.
50. Shleifer, A. "Do Demand Curves for Stocks Slope Down?" Journal ofFinance, 41 (1986), 579-590.
51. Shleifer, A., and R. W. Vishny. "The Limits of Arbitrage." Journal ofFinance, 52 (1997), 35-55.
52. Treynor, J. L., and F. Black. "How to Use Security Analysis to Improve Portfolio Selection." Journal ofBusiness, 46 (1973), 66-86.
53. Van Nieuwerburgh, S., and L. Veldkamp. "Information Acquisition and Under-Diversification." Review ofEconomic Studies, forthcoming (2009).
54. Wermers, R. "Mutual Fund Performance: An Empirical Decomposition into Stock-Picking Talent, Style, Transactions Costs, and Expenses." Journal ofFinance, 55 (2000), 1655-1695.
55. Wurgler, J., and E. Zhuravskaya. "Does Arbitrage Flatten Demand Curves for Stocks?" Journal of Business, 75 (2002), 583-608.