Do Common Stocks Have Perfect Substitutes? Product Market Competition and the Elasticity of Demand for Stocks

Kenneth Ahern

The Review of Economics and Statistics, 2014, vol. 96, issue 4, 756-766

Abstract: Though common stocks are one of the most important assets in an economy, little is known about their demand curves. I estimate demand curves for 144 NYSE stocks using a unique data set of all orders, including off-equilibrium orders, during three months in 1990 and 1991. Connecting asset pricing with industrial organization, I find that stocks of firms in less competitive industries are more elastic because they have closer substitutes than stocks in more competitive industries. Tests that exploit the 1991 Gulf War shock and S&P 500 Index additions confirm these results. © 2014 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Keywords: stocks; market competition; elasticity; demand curves; NYSE (search for similar items in EconPapers)
JEL-codes: L00 P43 (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00414 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tpr:restat:v:96:y:2014:i:4:p:756-766

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535

Access Statistics for this article

The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by The MIT Press ().