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 and Finance, 104. 19 -30. ISSN 1872-6372

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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: Article
Subjects: Finance
Date Deposited: 02 Jul 2019 12:46
Last Modified: 06 Jul 2023 06:35
URI: https://eprints.exchange.isb.edu/id/eprint/1219

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