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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Yang, C.W., Hung, K., Brigida, M.D. (2015). The Le Châtelier Principle of the Capital Market Equilibrium. In: Lee, CF., Lee, J. (eds) Handbook of Financial Econometrics and Statistics. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7750-1_47
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DOI: https://doi.org/10.1007/978-1-4614-7750-1_47
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