Price Multipliers are Larger at More Aggregate Levels
104 Pages Posted: 28 Mar 2022 Last revised: 3 Feb 2025
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: Suggested Citation