The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Demand Curves for Stocks Do Slope Down: New Evidence from an Index Weights Adjustment
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00230
Aditya Kaul, Vikas Mehrotra, Randall Morck
Weights in the Toronto Stock Exchange 300 index are determined by the market values of the included stocks' public floats. In November 1996, the exchange implemented a previously announced revision of its definition of the public float. This revision, which increased the floats and the index weights of 31 stocks, conveyed no information and had no effect on the legal duties of shareholders. Affected stocks experienced statistically significant excess returns of 2.3 percent during the event week, and no price reversal occurred as trading volume returned to normal levels. These findings support downward sloping demand curves for stocks.