Short- and long-term demand curves for stocks: theory and evidence on the dynamics of arbitrage

@article{Greenwood2005ShortAL,
  title={Short- and long-term demand curves for stocks: theory and evidence on the dynamics of arbitrage},
  author={R. Greenwood},
  journal={Journal of Financial Economics},
  year={2005},
  volume={75},
  pages={607-649}
}
  • R. Greenwood
  • Published 2005
  • Economics
  • Journal of Financial Economics
Abstract I develop a framework to analyze demand curves for multiple risky securities at extended horizons in a setting with limits-to-arbitrage. Following an unexpected change in uninformed investor demand for several assets, I predict returns of each security to be proportional to the contribution of that security's demand shock to the risk of a diversified arbitrage portfolio. I show that securities that are not affected by demand shocks but are correlated with securities undergoing changes… Expand
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