We derive fundamental limits to demand analysis in financial markets from two foundational principles of asset pricing: (i) investors value assets for their payoffs, and (ii) prices satisfy no arbitrage. Given these principles, we show that (iii) asset demand curves are not structural objects and that even perfectly exogenous supply shocks provide incorrect price variation for demand estimation. The only exception is the knife-edge case...

We examine how portfolio regulations affect risk sharing between financial institutions with market power. Unconstrained access to complete markets permits flexible exploitation of market power and induces inefficient risk sharing. Appropriate portfolio restrictions counteract this, improving liquidity and risk sharing by bundling securities with offsetting strategic incentives. However, excessive regulation can be counterproductive, destroying gains from trade. An application of our theory shows that cross-asset...