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We develop a multi-period model of strategic trading in an asset market where traders are uncertain about market liquidity. In our model, informed traders strategically trade against competitive market makers to exploit their short-lived private information. Unlike market makers, informed...
Persistent link: https://www.econbiz.de/10005666969
heterogeneity and incomplete markets. We show how knowledge about dividends and optimal behavior alone fail to fully inform agents …
Persistent link: https://www.econbiz.de/10008577809
Survey respondents strongly disagree about return risks and, increasingly, macroeconomic uncertainty. This may have contributed to higher asset prices through increased use of collateralisation, which allows risk-neutral investors to realise perceived gains from trade. Investors with lower risk...
Persistent link: https://www.econbiz.de/10011084220
Using a large representative sample of Indian retail equity investors, many of them new to the stock market, we show … a manner more consistent with the recommendations of finance theory, although this tendency is weakened by strong … investment performance. High trading profits increase turnover, while high returns to equity styles have a short-term negative …
Persistent link: https://www.econbiz.de/10011084250
In a market with short term agents and heterogeneous information, when liquidity trading displays persistence, prices reflect average expectations about fundamentals and liquidity trading. Informed investors exploit a private learning channel to infer the demand of liquidity traders from the...
Persistent link: https://www.econbiz.de/10008873331
We study a general static noisy rational expectations model, where investors have private information about asset payo¤s, with common and private components, and about their own exposure to an aggregate risk factor, and derive conditions for existence and uniqueness (or multiplicity) of...
Persistent link: https://www.econbiz.de/10008466347
We consider the strategic timing of information releases in a dynamic disclosure model. Because investors don’t know whether or when the firm is informed, the firm will not necessarily disclose immediately. We show that bad market news can trigger the immediate release of information by firms....
Persistent link: https://www.econbiz.de/10009364996
I estimate a search-and-bargaining model of a decentralized market to quantify the effects of trading frictions on asset allocations, asset prices and welfare, and to quantify the effects of intermediaries that facilitate trade. Using business-aircraft data, I find that, relative to the...
Persistent link: https://www.econbiz.de/10011262889
The fall in US macroeconomic volatility from the mid-1980s coincided with a strong rise in asset prices. Recently, this rise, and the crash that followed, have been attributed to overconfidence in a benign macroeconomic environment of low volatility. This paper introduces learning about the...
Persistent link: https://www.econbiz.de/10009385764
We study the extent to which self-referential adaptive learning can explain stylized asset pricing facts in a general equilibrium framework. In particular, we analyze the effects of recursive least squares and constant gain algorithms in a production economy and a Lucas type endowment economy....
Persistent link: https://www.econbiz.de/10005789201