The Price Elasticity of Demand for Common Stock

Loderer, Claudio; Cooney, John; Drunen, Leonard D. Van

doi:10.2307/2328839

Cited by 48 publications

(34 citation statements)

References 0 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…As expected, estimates of this elasticity is higher for bonds than for other assets. These numbers are a bit lower than other estimates in the literature which found values between 6 and 12 for equities (see Loderer et al (1991), Wurgler and Zhuravskaya (2002) and Martin and Rey (2006) for a short survey of those elasticities). However, the elasticity we estimate is for assets from different countries whereas the literature has focused on the elasticity between assets of the same country.…”

Section: Tablecontrasting

confidence: 72%

The geography of asset trade and the euro: Insiders and outsiders

Coeurdacier

Martin

2009

Journal of the Japanese and International Economies

156

145

View full text Add to dashboard Cite

Coeurdacier, Nicolas, and Martin, Philippe-The geography of asset trade and the euro: Insiders and outsidersThis paper analyzes the determinants of cross-border asset trade on cross-country data and a Swedish data set. We focus our analysis on the impact of the euro for the determinants of trade in bonds, equity and banking assets. With the help of a theoretical model, we disentangle the different effects that the euro may have on cross-border asset holdings for both euro zone countries and countries outside of the euro zone. We find evidence that the euro implies 1) a unilateral financial liberalization which makes it cheaper for all countries to buy euro zone assets. For bonds and equity holdings, this translates into approximately 14% and 17% lower transaction costs; 2) a preferential financial liberalization which on top of the previous effect lowers transaction costs inside the euro zone by approximately 17% and 10% for bonds and equity respectively; 3) a diversion effect due to the fact that lower transaction costs inside the euro zone entail euro countries to purchase less equity from outside the euro zone. Our empirical analysis also suggests that the elasticity of substitution between bonds inside the euro zone is three times higher than between bonds denominated in different currencies.

show abstract

Section: Tablecontrasting

confidence: 72%

The geography of asset trade and the euro: Insiders and outsiders

Coeurdacier

Martin

2009

Journal of the Japanese and International Economies

156

145

View full text Add to dashboard Cite

show abstract

“…Schipper and Smith (1986) examined 76 equity carve‐outs that took place over the period 1965 through 1983 and report an average excess return of +1.8 percent over a five‐day interval leading up to the carve‐out announcements. The increase in stock prices in response to carve‐outs is intriguing because a number of studies, including Asquith and Mullins (1986), Dann and Mikkelson (1984), Masulis and Korwar (1986), and Loderer, Cooney, and Van Drunen (1991), among others, report that seasoned equity issues are associated with an average stock price reaction of −2 to −3 percent.…”

Section: The Managerial Discretion Hypothesis and Related Literaturementioning

confidence: 99%

Equity Carve‐Outs and Managerial Discretion

Allen

1998

The Journal of Finance

149

127

View full text Add to dashboard Cite

This study proposes a managerial discretion hypothesis of equity carve-outs in which managers value control over assets and are reluctant to carve out subsidiaries. Thus, managers undertake carve-outs only when the firm is capital constrained. Consistent with this hypothesis, firms that carve out subsidiaries exhibit poor operating performance and high leverage prior to carve-outs. Also consistent with this hypothesis, in carve-outs wherein funds raised are used to pay down debt, the average excess stock return of ϩ6.63 percent is significantly greater than the average excess stock return of Ϫ0.01 percent for carve-outs wherein funds are retained for investment purposes.IN THIS STUDY, WE INVESTIGATE the financial and operating performance of firms that undertake equity carve-outs and analyze the cross section of excess stock returns around the announcement of these transactions. In an equity carve-out, a firm offers to sell shares in a wholly owned subsidiary to the public. As such, a carve-out can be viewed as the sale of an asset or as an equity offering. Schipper and Smith (1986) focus on carve-outs as equity offerings and compare the announcement period stock returns of carve-outs with those of seasoned equity offerings. In this study, we view the carve-out as the sale of an asset which is intended to raise funds to finance other activities of the parent or the subsidiary.In viewing equity carve-outs as asset sales, we borrow from the work of Lang, Poulsen, and Stulz (1995) who propose and test a "financing hypothesis" to explain the cross section of excess stock returns around announcements of asset sales. The characterization of an equity carve-out as a sale of assets must be tempered by the fact that certain features distinguish carveouts from outright asset sales. Equity carve-outs are asset sales to public shareholders as opposed to a single buyer, carve-outs are undertaken explicitly for the purpose of raising funds in the capital market, and the parent firm typically continues to hold a substantial fraction of the equity of the carved out subsidiary following the offering. Equity carve-outs are similar to asset sales in that funds raised in the offering can be either retained within

show abstract

“…See the discussion inKoeplin et al (2000, p. 95) andHertzel and Smith (1993).23 See, among others,Mikkelson and Partch (1985),Holthausen et al (1987),Ball and Finn (1989),Loderer et al (1991),Seppi (1992),Keim and Madhavan (1996),Cheng and Madhavan (1997), andSaar (2001).…”

mentioning

confidence: 99%

The pricing discount for limited liquidity: evidence from SWX Swiss Exchange and the Nasdaq

Loderer

Roth

2005

Journal of Empirical Finance

Self Cite

View full text Add to dashboard Cite

We investigate the pricing discount for limited liquidity. Unlike previous studies that have examined the relation between historical returns and liquidity, ours looks directly at current stock prices. This approach requires less data and yields up-to-date information about limited liquidity discounts. We analyze data from the Swiss exchange and the Nasdaq during 1995-2001, and find a statistically and economically significant price-liquidity relation in both markets. We test the robustness of that relation with a procedure that does not rely on specific distributional assumptions. Our findings are unaffected. According to the evidence, the median discount can reach 30%. D 2004 Elsevier B.V. All rights reserved. JEL classifications: G12; G31

show abstract

The Price Elasticity of Demand for Common Stock

Cited by 48 publications

References 0 publications

The geography of asset trade and the euro: Insiders and outsiders

The geography of asset trade and the euro: Insiders and outsiders

Equity Carve‐Outs and Managerial Discretion

The pricing discount for limited liquidity: evidence from SWX Swiss Exchange and the Nasdaq

Contact Info

Product

Resources

About