Demand-based Asset Pricing: Theory, Estimation and Applications

This thesis investigates the relationship between investors' demand shocks and asset pricesthrough the use of data on portfolio holdings. In three chapters, I study the theory, estimation,and application of demand-based asset pricing models, which incorporate data on investors'portfolio holdings and equilibrium asset prices. I first present a generalized framework andpropose a new estimator of investor-specific demand curves that is based on time-serieschanges in investors' portfolios. I then use and extend the proposed estimator to quantify theequilibrium price impact of the growing institutional demand for sustainable investments. Ishow that the returns from sustainable investing are strongly driven by price pressure fromflows towards sustainable funds, causing high realized returns that do not reflect high expectedreturns. The last chapter quantifies the price impact of the retail investment boom duringthe Covid-19 pandemic via a structural model that uses data on portfolio holdings of UShouseholds.