Price Multipliers are Larger at More Aggregate Levels

104 Pages Posted: 28 Mar 2022 Last revised: 3 Feb 2025

See all articles by Jiacui Li

Jiacui Li

David Eccles School of Business, University of Utah

Zihan Lin

Stanford University

Date Written: June 16, 2022

Abstract

We decompose demand imbalances in the U.S. stock market into components at different levels of aggregation and estimate their respective price impacts using a unified approach. The results reveal that price multipliers form a continuum that is higher at higher lev- els of aggregation. Our findings are inconsistent with information-based explanations and qualitatively consistent with mechanisms based on risk-averse investor demand. This paper proposes a new demand measure for asset pricing studies. As price multipliers are determined by investor demand elasticities, our results highlight the importance of capturing cross-asset substitutions in modeling investor behavior. 

Keywords: Price multiplier, demand-based asset pricing, substitution, demand-elasticity

JEL Classification: G11, G12

Suggested Citation

Li, Jiacui and Lin, Zihan, Price Multipliers are Larger at More Aggregate Levels (June 16, 2022). Available at SSRN: https://ssrn.com/abstract=4038664 or http://dx.doi.org/10.2139/ssrn.4038664

Jiacui Li (Contact Author)

David Eccles School of Business, University of Utah ( email )

HOME PAGE: http://https://www.jiacui-li.com/

Zihan Lin

Stanford University ( email )

367 Panama St
Stanford, CA 94305
United States

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