The Price Elasticity of Demand for Common Stock

Claudio Loderer, John W Cooney and Leonard D van Drunen

Journal of Finance, 1991, vol. 46, issue 2, 621-51

Abstract: The authors study the price elasticity of demand for the common stock of an individual corporation. Despite the prevalance of assumptions that demand is perfectly elastic, there is little, if any, direct evidence in the literature to either support or reject that contention. Consistent with the notion of finite price elasticities, the authors find that the announcement of primary stock offerings by regulated firms depresses their stock prices and little, if any, evidence that this decline is the result of adverse information about future cash flows. Attempts to relate offer announcement effects directly to possible determinants of price elasticities, however, are inconclusive. Copyright 1991 by American Finance Association.

Date: 1991
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