Price impact and portfolio impact
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.
Year of publication: |
2011
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Authors: | Cvitanic, Jaksa ; Malamud, Semyon |
Published in: |
Journal of Financial Economics. - Elsevier, ISSN 0304-405X. - Vol. 100.2011, 1, p. 201-225
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Publisher: |
Elsevier |
Keywords: | Survival Price impact Equilibrium Heterogeneous agents Optimal portfolios |
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