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Price Impact and Portfolio Impact

  • Jaksa CVITANIC


  • Semyon MALAMUD

    (EPF Lausanne and Swiss Finance Institute)

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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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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  19. Jouini, Elyès & Napp, Clotilde, 2007. "Consensus Consumer and Intertemporal Asset Pricing with Heterogeneous Beliefs," Economics Papers from University Paris Dauphine 123456789/78, Paris Dauphine University.
  20. Basak, Suleyman, 2000. "A model of dynamic equilibrium asset pricing with heterogeneous beliefs and extraneous risk," Journal of Economic Dynamics and Control, Elsevier, vol. 24(1), pages 63-95, January.
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