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Introduction to Financial Econometrics and Statistics Read chapter Read first chapter

2015 | OriginalPaper | Chapter

99. The Le Châtelier Principle of the Capital Market Equilibrium

Authors : Chin W. Yang, Ken Hung, Matthew D. Brigida

Published in: Handbook of Financial Econometrics and Statistics

Publisher: Springer New York

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Abstract

This chapter 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 in 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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previous chapter Option Pricing and Hedging Performance Under Stochastic Volatility and Stochastic Interest Rates
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Metadata
Title
The Le Châtelier Principle of the Capital Market Equilibrium
Authors
Chin W. Yang
Ken Hung
Matthew D. Brigida
Copyright Year
2015
Publisher
Springer New York
Book
Handbook of Financial Econometrics and Statistics

Print ISBN: 978-1-4614-7749-5

Electronic ISBN: 978-1-4614-7750-1

Copyright Year: 2015

DOI
https://doi.org/10.1007/978-1-4614-7750-1_47