Price Barriers and the Dynamics of Asset Prices in Equilibrium
Silverio Foresi and
David J. Hait
Journal of Financial and Quantitative Analysis, 1997, vol. 32, issue 02, 137-159
A price barrier is a price level at which a large number of investors either buy or sell securities. We analyze the dynamics of asset prices in an economy in which price barriers exist. Our analysis suggests that asset prices and volatility can exhibit jumps when the price barrier is reached. Interestingly, the market's anticipation of future trades can influence prices in the opposite direction from what one might expect. For example, when multiple barriers exist, stock prices can be inflated, rather than depressed, in the proximity of an anticipated stock sale.
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Working Paper: "Price Barriers" and the Dynamics of Asset Prices in Equilibrium (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:32:y:1997:i:02:p:137-159_00
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