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Price impact and portfolio impact

  • Cvitanic, Jaksa
  • Malamud, Semyon

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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