Price Impact and Portfolio Impact
80 Pages Posted: 18 Jun 2010
Date Written: June 13, 2010
Abstract
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.
Keywords: Survival, Price Impact, Equilibrium, Heterogeneous Agents, Optimal Portfolios
JEL Classification: D53, G11, G12
Suggested Citation: Suggested Citation
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