Demand Curves For Stocks Do Not Slope Down: Evidence Using an Exogenous Supply Shock
By Ankit Jain, Prasanna Tantri, Ramabhadran Thirumalai
Journal of Banking and Finance | July 2019
DOI
www.sciencedirect.com/science/article/pii/S0378426619300676?via%3Dihub
Citation
Jain, Ankit., Tantri, Prasanna., Thirumalai, Ramabhadran. (2017). Demand Curves For Stocks Do Not Slope Down: Evidence Using an Exogenous Supply Shock Journal of Banking and Finance www.sciencedirect.com/science/article/pii/S0378426619300676?via%3Dihub.
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Journal of Banking and Finance, 2017
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Abstract
We analyze the price impact of an exogenous share sale by inside blockholders, who were forced to sell a part of their shareholdings due to a regulatory change in India. The affected firms experience a negative excess return of 4.5% during the issue week. Crucially, the price impact reverses in about 55 to 75 days after the event. Our results are consistent with the view that the long term demand curves for stocks are
at: a view echoed by classical finance theories. The short term price reaction to a sale is likely to be a result of temporary price pressure.

Prasanna Tantri is an Associate Professor of Finance and the Executive Director of the Centre for Analytical Finance at the Indian School of Business (ISB). He also serves as an Independent Director and Chair of the Audit Committee at Power Finance Corporation. In 2o24, he was appointed as a Member of the Technical Advisory Committee for the Evaluation of Schemes for the Promotion of Digital Payments in India, under the Development Monitoring & Evaluation Office (DMEO), NITI Aayog.

Professor Tantri has previously been a part of the Expert Working Group at the National Stock Exchange and a Member of the Technical Group on the Social Stock Exchange, constituted by the Securities and Exchange Board of India. His research interests include banking, financial inclusion, financial contagion, regulation, and the relationship between politics and finance.

Prasanna Tantri (1)
Prasanna Tantri

Ramabhadran S. Thirumalai is an Associate Professor of Finance (Practice) at the Indian School of Business (ISB). He is currently working on the impact of various regulatory changes on securities market pricing, efficiency, and liquidity. His research interests also include the trading behaviour of various types of market participants, with a particular focus on proprietary trading.

He teaches courses on Derivatives and Security Markets in the PGP programme, as well as, introductory finance courses in several programmes at ISB.

Ramabhadran Thirumalai
Ramabhadran Thirumalai