Price impact and portfolio impact
We study survival, price impact, and portfolio impact in heterogeneous economies. We show that, under the equilibrium risk-neutral measure, long-run price impact is in fact equivalent to survival, whereas long-run portfolio impact is equivalent to survival under an agent-specific, wealth-forward measure. These results allow us to show that price impact and portfolio impact are two independent concepts: a nonsurviving agent with no long-run price impact can have a significant long-run impact on other agents' optimal portfolios. (C) 2010 Elsevier B.V. All rights reserved.
Keywords: Survival ; Price impact ; Equilibrium ; Heterogeneous agents ; Optimal portfolios ; Heterogeneous Beliefs ; Risk-Aversion ; Term Structure ; Returns ; Model ; Consumption ; Equilibria ; Selection ; Markets ; Economy
Record created on 2011-12-16, modified on 2016-08-09