Demand Curves For Stocks Do Not Slope Down: Evidence Using an Exogenous Supply Shock

Jain, A and Tantri, P L and Thirumalai, R S (2016) Demand Curves For Stocks Do Not Slope Down: Evidence Using an Exogenous Supply Shock. Working Paper. Indian School of Business.

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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.

Item Type: Monograph (Working Paper)
Subjects: Finance
Date Deposited: 02 Jul 2019 12:40
Last Modified: 02 Jul 2019 12:40
URI: https://eprints.exchange.isb.edu/id/eprint/1218

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