Does Arbitrage Flatten Demand Curves for Stocks?

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  • 1 January 2000
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      • Published in RePEc
Abstract
In textbook theory, demand curves for stocks are kept flat by riskless arbitrage between perfect substitutes. In reality, however, individual stocks do not have perfect substitutes. The risk inherent in arbitrage between imperfect substitutes may deter risk-averse arbitrageurs from flattening demand curves. Consistent with this s

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