Demand curves for stocks do not slope down: Evidence using an exogenous supply shock

Jain, A and Tantri, P L and Thirumalai, R S (2019) Demand curves for stocks do not slope down: Evidence using an exogenous supply shock. Journal of Banking & Finance, 104. 19 - 30.

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Abstract

We analyze the price impact of an exogenous share sale of inside blockholders who were forced to sell a part of their shareholdings following a regulatory change in India. The affected firms experience a negative excess return of 4.3 during the issue week. Crucially, the price impact reverses within around 16 days of the event. Our results are consistent with the view that long-term demand curves for stocks are flat; this view is echoed in classical finance theories. The short-term price reaction to a sale is probably due to temporary price pressure.

Affiliation: Indian School of Business
ISB Creators:
ISB CreatorsORCiD
Tantri, P LUNSPECIFIED
Thirumalai, R Shttp://orcid.org/0000-0001-9251-6829
Item Type: Article
Uncontrolled Keywords: Supply shock, Slow moving capital, Demand curve, Price pressure
Subjects: Finance
Depositing User: Ilayaraja M
Date Deposited: 21 Jun 2019 19:27
Last Modified: 01 Jul 2019 17:04
URI: http://eprints.exchange.isb.edu/id/eprint/1153
Publisher URL: https://doi.org/10.1016/j.jbankfin.2019.03.012
Publisher OA policy: http://sherpa.ac.uk/romeo/issn/0378-4266/
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