Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 7, 2022 erstellt
Description:
I generalize the textbook arbitrage-pricing framework to characterize how uninformative flows generate price impacts. The modeled channel is that price impacts arise as marginal investors' risk compensation. I build a new model of price impacts that allows for common factors of flows and common factors of returns in the cross section of assets. My model is the flow generalization of the canonical factor model of expected returns and allows for direct empirical implementation. To derive this model, I generalize Ross arbitrage pricing theory to flows. I also obtain several useful theoretical results, including flow-based stochastic discount factor, flow-based Hansen-Jagannathan bound, portfolio flow theory, and formalization of the cross-sectional restrictions of price impacts