Investors' Interacting Demand and Supply Curves for Common Stocks

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Complete limit order data from Korea show individual stocks' demand and supply elasticities correlating negatively in short windows. That is, whenever a stock's demand is unusually elastic, its supply is unusually inelastic, and vice versa. However, in long windows, individual stocks' demand and supply elasticities correlate positively. Notably, both fall about 40% with the 1997 Asian Financial Crisis, and remain depressed long after the market and macroeconomic variables recover. A parsimonious model explains both findings with investor information heterogeneity and risk-aversion parameters, fixed in the short-run, being permanently shifted by the crisis
Publisher
OXFORD UNIV PRESS
Issue Date
2016-07
Language
English
Article Type
Article
Citation

REVIEW OF FINANCE, v.20, no.4, pp.1517 - 1547

ISSN
1572-3097
DOI
10.1093/rof/rfv042
URI
http://hdl.handle.net/10203/212464
Appears in Collection
MT-Journal Papers(저널논문)
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