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Price impact and portfolio impact

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  • Cvitanic, Jaksa
  • Malamud, Semyon

Abstract

We study survival, price impact, and portfolio impact in heterogeneous economies. We show that, under the equilibrium risk-neutral measure, long-run price impact is in fact equivalent to survival, whereas long-run portfolio impact is equivalent to survival under an agent-specific, wealth-forward measure. These results allow us to show that price impact and portfolio impact are two independent concepts: a nonsurviving agent with no long-run price impact can have a significant long-run impact on other agents' optimal portfolios.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 100 (2011)
Issue (Month): 1 (April)
Pages: 201-225

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Handle: RePEc:eee:jfinec:v:100:y:2011:i:1:p:201-225

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Web page: http://www.elsevier.com/locate/inca/505576

Related research

Keywords: Survival Price impact Equilibrium Heterogeneous agents Optimal portfolios;

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References

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Citations

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Cited by:
  1. Lioui, Abraham, 2013. "Time consistent vs. time inconsistent dynamic asset allocation: Some utility cost calculations for mean variance preferences," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 1066-1096.
  2. Georgy Chabakauri, 2012. "Asset Pricing with Heterogeneous Investors and Portfolio Constraints," FMG Discussion Papers dp707, Financial Markets Group.
  3. Paolo Guasoni & Constantinos Kardaras & Scott Robertson & Hao Xing, 2014. "Abstract, classic, and explicit turnpikes," Finance and Stochastics, Springer, vol. 18(1), pages 75-114, January.
  4. Roman Muraviev, 2013. "Market selection with learning and catching up with the Joneses," Finance and Stochastics, Springer, vol. 17(2), pages 273-304, April.

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