Price Multipliers are Larger at More Aggregate Levels

109 Pages Posted: 28 Mar 2022 Last revised: 2 Jan 2024

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 the price multipliers form a continuum that is higher at more aggregate levels. Our findings are inconsistent with information-based explanations but are largely consistent with mechanisms based on risk-averse liquidity providers. Our paper proposes a new demand measure for asset-pricing studies, provides support for the “flow-driven” view of aggregate price fluctuations, and bears implications for the modeling of demand-based price effects.

Keywords: Price multiplier, liquidity provision, demand-based asset pricing

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 )

Stanford, CA 94305
United States

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