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 at the Indian School of Business (ISB) and Executive Director of the Centre for Analytical Finance (CAF). He previously served as an Independent Director and Chair of the Audit and CSR Committees on the Board of Power Finance Corporation Limited, Government of India.

His research focuses on banking, financial inclusion, and the political economy of finance, with publications in leading journals including the Review of Financial Studies, Review of Finance, Journal of Accounting and Economics, Journal of Accounting Research, Management Science, and Journal of Financial and Quantitative Analysis. He has presented his research at premier academic forums and has received several competitive research grants and teaching awards.

Prasanna’s work has been widely cited in policy and media, including The Economist, Bloomberg, Mint, and The Economic Times, and has been referenced in the Union Budget, the Economic Survey of India, and RBI reports. He has advised and presented his work to the Prime Minister’s Office, Ministry of Finance, RBI, and several central and state government bodies. He also headed the group entrusted by the Government of Telangana with drafting the Telangana Vision 2047 document, contributing to the development of the state’s long-term vision and strategic roadmap. Over the years, he has also contributed to several high-level advisory and expert bodies, including the Technical Advisory Committee under DMEO, NITI Aayog, and expert groups constituted by the National Stock Exchange and SEBI. These engagements reflect his broader contribution to translating rigorous academic research into policy and regulatory practice.

Prasanna Tantri
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