Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/43258 
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dc.contributor.authorHendershott, Terrenceen
dc.contributor.authorMenkveld, Albert J.en
dc.date.accessioned2010-07-05-
dc.date.accessioned2010-12-15T09:22:41Z-
dc.date.available2010-12-15T09:22:41Z-
dc.date.issued2010-
dc.identifier.piurn:nbn:de:hebis:30-78662en
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
dc.language.isoengen
dc.publisher|aGoethe University Frankfurt, Center for Financial Studies (CFS) |cFrankfurt a. M.en
dc.relation.ispartofseries|aCFS Working Paper |x2010/14en
dc.subject.jelG12en
dc.subject.jelG14en
dc.subject.jelD53en
dc.subject.jelD61en
dc.subject.ddc330en
dc.subject.keywordLiquidityen
dc.subject.keywordInventory Risken
dc.subject.keywordIntermediaryen
dc.subject.keywordVolatilityen
dc.subject.stwBörsenkursen
dc.subject.stwVolatilitäten
dc.subject.stwFinanzintermediären
dc.subject.stwRisikoaversionen
dc.subject.stwMarktliquiditäten
dc.subject.stwWertpapiergeschäften
dc.subject.stwSchocken
dc.subject.stwSchätzungen
dc.subject.stwUSAen
dc.titlePrice pressures-
dc.typeWorking Paperen
dc.identifier.ppn630565678en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen
dc.identifier.repecRePEc:zbw:cfswop:201014en

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