Heterogeneous Investors and Their Changing Demand and Supply Schedules for Individual Common Stocks

64 Pages Posted: 26 Mar 2004

See all articles by Jung-Wook Kim

Jung-Wook Kim

Seoul National University - Graduate School of Business

Jason Lee

University of Alberta

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: March 23, 2004

Abstract

Using 550 million limit orders submitted in the Korea Stock Exchange, we estimate demand and supply elasticities of heterogeneous investor types and their changes around the Asian financial crisis. We find that domestic individuals have substantially more inelastic demand and supply curves than domestic institutions and foreign investors. The crisis permanently reduced price elasticities of domestic individuals by 50% but had no effect on those of foreign investors. Institutional changes restricting margin purchases, implemented after the crisis, seem particularly important in explaining the dramatic drop. Information heterogeneity, availability of close substitutes and arbitrage risk also explain time-series variations in elasticities.

JEL Classification: G10, G14, G15

Suggested Citation

Kim, Jung-Wook and Lee, Jason and Morck, Randall K., Heterogeneous Investors and Their Changing Demand and Supply Schedules for Individual Common Stocks (March 23, 2004). Harvard Institute of Economic Research Discussion Paper No. 2031. Available at SSRN: https://ssrn.com/abstract=521142 or http://dx.doi.org/10.2139/ssrn.521142

Jung-Wook Kim (Contact Author)

Seoul National University - Graduate School of Business ( email )

Seoul, 151-742
Korea, Republic of (South Korea)

Jason Lee

University of Alberta ( email )

Edmonton, Alberta T6G 2R6
Canada
780-492-4839 (Phone)
780-492-3325 (Fax)

Randall K. Morck

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-5683 (Phone)
780-492-3325 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governence Institute ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Asian Bureau of Finance and Economic Research ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

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