Electricity prices can go negative, interest rates can go negative, so yeah, there are conceivable circumstances where the "stock market" can go not just to zero but negative. I.e., people paying something to get rid of their stock ownership.
Argumemts about rationality and arbitrage are good for quantitative finance books and the make-believe worlds they construct. They dont define the limits of what can actually happen in human economies.
I don’t know if these are good examples. Money and electricity both have inherent liabilities that don’t seem to translate to stock. At the end of the day, cash has to be transported and stored somewhere. Negative interest rates can be used to effectively pay somebody else to store your cash. A similar situation has happened with oil prices going negative.
Negative electric rates could be used to increase load on a grid that would otherwise be generating too much electricity.
Is there any kind of liability that comes with owning stock in a company? I don’t see any motivation to ever pay for somebody to take ownership of your stock.
In 2022, Meta was added to the list of terrorist and extremist organisations in Russia, and some people suggested that owners of Meta stock should be considered sponsors of terrorism. Do a few more steps and stock may become a liability.
The concept of limited liability limits this negative scenario. And my limit buy for the entire US stock market @5cents keeps it from going to exact zero
There are exceptions to limited liability. Courts can pierce the corporate veil and hold directors or shareholders responsible when a case gets controversial enough.
I’m not aware of a recent example of public company shareholders being held liable, but it’s only one Supreme Court decision away.
> there are conceivable circumstances where the "stock market" can go not just to zero but negative
No there are not. As a shareholder you cannot be held accountable for losses of the company you're holding the shares of. In the worst case, your share becomes worthless.
What if your stock was worthless or close to worthless and your broker/custodian was charging you a hefty fee to hold it for you? Then it could be rational for you to pay someone to take it off your hands.
While stocks have limited liability, there can still be costs associated with holding them which could theoretically drive their prices negative.
if you own a stock that society comes to see as despicable you might get into a situation where you want to get rid of it at any price, including paying
clearly the company behind that stock is not viable if that sentiment persist but the negative market price is theoretically possible
ex-post an extraordinary event a lot of people are wise and can "rationalise" how it did happen.
the question is whether one can rationalize what can happen before it does.
that requires understanding in depth what the system is and how it might behave in extremes
open any quantitative finance book older than a few years and it will tell you that interest rates cannot go negative because... blah blah... some cash arbitrage
it turns out that arbitrage is not implementable...
Argumemts about rationality and arbitrage are good for quantitative finance books and the make-believe worlds they construct. They dont define the limits of what can actually happen in human economies.