Attempts to identify price pressures caused by large transactions may be inconclusiveif the transactions convey new information to the market. This problem is addressed in an examination of prices and volume surrounding changes in the composition of the S&P 500. Since these changes cause some investors to adjust their holdings of the affected securities and since it is unlikely that the changes convey information about the future prospects of these securities, they provide an excellent opportunity to study price pressures. The results are consistent with the price-pressure hypothesis: immediately after an addition is announced, prices increase by more than 3 percent. This increase is nearly fully reversed after 2 weeks. THE EFFICIENT MARKET HYPOTHESIS (EMH) predicts that security prices reflect all publicly available information. Therefore, one corollary of the EMH is that "you can sell (or buy) large blocks of stock at close to the market price as long as you can convince other investors that you have no private information."1 This statement assumes that securities are near perfect substitutes for each other. If so, the excess demand for a single security will be very elastic, and the sale or purchase of a large number of shares will have no impact on price.In contrast to the EMH, Scholes [8], Kraus and Stoll [5], Hess and Frost [4], and others propose two hypotheses which predict that a large stock sale (purchase) will cause the price to decrease (increase) even if no new information is associated with the transaction. The imperfect substitutes hypothesis (ISH), also known as the distribution effect hypothesis, assumes that securities are not close substitutes for each other, and hence, that long-term demand is less than perfectly elastic. Under this hypothesis, equilibrium prices change when demand curves shift to eliminate excess demand. Price reversals are not expected because the new price reflects a new equilibrium distribution of security holders.The price-pressure hypothesis (PPH) assumes that investors who accommodate demand shifts must be compensated for the transaction costs and portfolio risks that they bear when they agree to immediately buy or sell securities which they otherwise would not trade. These passive suppliers of liquidity are attracted by immediate price drops (rises) associated with large sales (purchases). They are compensated for their liquidity service when prices rise (drop) to their fullinformation levels. The PPH, like the EMH, assumes that long-run demand is The Journal of Finance perfectly elastic at the full-information price. It differs in that it recognizes that immediate information about non-information-motivated demand shifts may be costly, and hence that short-term demand curves may be less than perfectly elastic.The effect on price of large stock sales is studied by Scholes [8] and Mikkelson and Partch [6] in the case of secondary distributions, by Kraus and Stoll [5], Dann, Mayers, and Raab [2], and others in the case of block sales, and by Hess and Frost [4] in the cas...

In this article, we exhibit a large class of Banach spaces whose open unit balls are bounded symmetric homogeneous domains. These Banach spaces, which we call J*-algebras, are linear spaces of operators mapping one Hilbert space into another and have a kind of Jordan tripte product structure. In particular, all Hilbert spaces and all B*--algebras are J*-algebras. Moreover, all four types of the classical Cartan domains and their infinite dimensional analogues are the open unit balls of J*-algebras, and the same holds for any finite or infinite product of these domains. Thus we have a setting in which a large number of bounded symmetric homogeneous domains may be studied simultaneously. A particular advantage of this setting is the interconnection which exists between function-theoretic problems and problems of functional analysis.This leads to a simplified discussion of both types of problems. A consequence of these results is that the open unit balls of two J*-a{gebras are holomorphically equivalent if and only if the J*-algebras are isometrically isomorphic under a mapping preserving the J*-structure. Another consequence is that the open unit ball of a J*-algebra is holomorphically equivalent to a product of balls if and only if the J*-algebra is isometrically isomorphic to a product of J*--algebras.The last result connects the factorization of domains with the factorization of J*-algebras and has a number of interesting applications. For example, using Cartan's classification of bounded symmetric domains in C n, we classify all J*-algebras of dimension less than 16. Moreover, we reduce the problem of classifying all finite dimensional J*-algebras to the problem of finding some J*-algebras whose open unit balls are holomorphically equivalent to the two exceptional Cartan domains in dimensions 16 and 27, respectively, when such J*-algebras exist. If there are such J*-atgebras in both cases, then every bounded symmetric I

No abstract

No abstract

No abstract