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http://hdl.handle.net/10419/43258
  

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dc.contributor.authorHendershott, Terrenceen_US
dc.contributor.authorMenkveld, Albert J.en_US
dc.date.accessioned2010-07-05en_US
dc.date.accessioned2010-12-15T09:22:41Z-
dc.date.available2010-12-15T09:22:41Z-
dc.date.issued2010en_US
dc.identifier.piurn:nbn:de:hebis:30-78662-
dc.identifier.urihttp://hdl.handle.net/10419/43258-
dc.description.abstractWe study price pressures in stock prices-price deviations from fundamental value due to a risk-averse intermediary supplying liquidity to asynchronously arriving investors. Empirically, twelve years of daily New York Stock Exchange intermediary data reveal economically large price pressures. A $100,000 inventory shock causes an average price pressure of 0.28% with a half-life of 0.92 days. Price pressure causes average transitory volatility in daily stock returns of 0.49%. Price pressure effects are substantially larger with longer durations in smaller stocks. Theoretically, in a simple dynamic inventory model the 'representative' intermediary uses price pressure to control risk through inventory mean reversion. She trades off the revenue loss due to price pressure against the price risk associated with remaining in a nonzero inventory state. The model's closed-form solution identifies the intermediary's relative risk aversion and the distribution of investors' private values for trading from the observed time series patterns. These allow us to estimate the social costs-deviations from constrained Pareto efficiency-due to price pressure which average 0.35 basis points of the value traded.en_US
dc.language.isoengen_US
dc.publisherCenter for Financial Studies Frankfurt, Mainen_US
dc.relation.ispartofseriesCFS Working Paper 2010/14en_US
dc.subject.jelG12en_US
dc.subject.jelG14en_US
dc.subject.jelD53en_US
dc.subject.jelD61en_US
dc.subject.ddc330en_US
dc.subject.keywordLiquidityen_US
dc.subject.keywordInventory Risken_US
dc.subject.keywordIntermediaryen_US
dc.subject.keywordVolatilityen_US
dc.subject.stwBörsenkursen_US
dc.subject.stwVolatilitäten_US
dc.subject.stwFinanzintermediären_US
dc.subject.stwRisikoaversionen_US
dc.subject.stwMarktliquiditäten_US
dc.subject.stwWertpapiergeschäften_US
dc.subject.stwSchocken_US
dc.subject.stwSchätzungen_US
dc.subject.stwUSAen_US
dc.titlePrice pressuresen_US
dc.typeWorking Paperen_US
dc.identifier.ppn630565678en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
dc.identifier.repecRePEc:zbw:cfswop:201014-
Appears in Collections:CFS Working Paper Series, Universität Frankfurt a. M.

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