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2006 | OriginalPaper | Chapter

48. The Le Chatelier Principle of the capital market equilibrium

Authors : Chin-Wei Yang, Ken Hung, John A. Fox

Published in: Encyclopedia of Finance

Publisher: Springer US

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Abstract

This paper purports to provide a theoretical underpinning for the problem of the Investment Company Act. The theory of the Le Chatelier Principle is well-known in thermodynamics: The system tends to adjust itself to a new equilibrium as far as possible. In capital market equilibrium, added constraints on portfolio investment on each stock can lead to inefficiency manifested in the right-shifting efficiency frontier. According to the empirical study, the potential loss can amount to millions of dollars coupled with a higher risk-free rate and greater transaction and information costs.

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Metadata
Title
The Le Chatelier Principle of the capital market equilibrium
Authors
Chin-Wei Yang
Ken Hung
John A. Fox
Copyright Year
2006
Publisher
Springer US
Book
Encyclopedia of Finance

Print ISBN: 978-0-387-26284-0

Electronic ISBN: 978-0-387-26336-6

Copyright Year: 2006

DOI
https://doi.org/10.1007/978-0-387-26336-6_74