Price Impact and Portfolio Impact
Copyright policy )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. (C) 2010 Elsevier B.V. All rights reserved.
- École Polytechnique Fédérale de Lausanne EPFL Switzerland
- California Institute of Technology United States
- Swiss Finance Institute Switzerland
- Centre for Economic Policy Research United Kingdom
survival, price impact, equilibrium, heterogeneous agents, optimal portfolios, jel: jel:D53, jel: jel:G12, jel: jel:G11
survival, price impact, equilibrium, heterogeneous agents, optimal portfolios, jel: jel:D53, jel: jel:G12, jel: jel:G11
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