THE EFFICIENT MARKET, PORTFOLIO THEORY, AND THE DOWNWARD SLOPING DEMAND HYPOTHESIS

Traditional theory holds that the price of a stock is not affected by changes in the stock's supply. Professor Booth argues that demand for individual stocks is ''downward sloping,'' and that changes in supply do affect stock price. After demonstrating that downward sloping demand does not conflict with the efficient market theory or modern portfolio theory, he goes on to explore the impact of downward sloping demand on the laws and policies governing public offerings, stock repurchases, tender offers, management buyouts and ''going private'' transactions, and the appraisal remedy.