Does Arbitrage Flatten Demand Curves for Stocks?

Jeffrey Wurgler and Ekaterina Zhuravskaya

Yale School of Management Working Papers from Yale School of Management

Abstract: In textbook theory, demand curves for stocks are kept flat by riskless arbitrage between perfect substitutes. In reality, however, individual stocks do not have perfect substitutes. The risk inherent in arbitrage between imperfect substitutes may deter risk-averse arbitrageurs from flattening demand curves. Consistent with this s

Date: 2000-08-01, Revised 2001-11-01
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Journal Article: Does Arbitrage Flatten Demand Curves for Stocks? (2002)
Working Paper: Does Arbitrage Flatten Demand Curves for Stocks? (2001)
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