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Price Impact and Portfolio Impact

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  • Jaksa CVITANIC

    (Caltech)

  • Semyon MALAMUD

    (EPF Lausanne and Swiss Finance Institute)

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 longrun 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

Paper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 10-26.

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Length: 80 pages
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:chf:rpseri:rp1026

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Web page: http://www.SwissFinanceInstitute.ch
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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. Georgy Chabakauri, 2012. "Asset Pricing with Heterogeneous Investors and Portfolio Constraints," FMG Discussion Papers dp707, Financial Markets Group.
  2. 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.
  3. Roman Muraviev, 2013. "Market selection with learning and catching up with the Joneses," Finance and Stochastics, Springer, vol. 17(2), pages 273-304, April.
  4. 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.

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