Price impact under heterogeneous beliefs and restricted participation

• 成果类型: Article
• 署名作者: Anthropelos, Michail; Kardaras, Constantinos
• 署名单位: University of Piraeus; University of London; London School Economics & Political Science
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2023.105774
• 发表日期: 2024
• 关键词: Thin markets; Restricted participation; Price impact; heterogeneous beliefs; Disagreement on second moments; welfare

摘要

We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders strategically trade against their price impacts. We prove existence and uniqueness of a corresponding equilibrium, and provide an efficient algorithm to numerically obtain the equilibrium prices and allocations given market's inputs. We find that restrictions may increase the market's welfare if traders have different views regarding the covariance matrix of securities returns. The latter heterogeneity regarding covariance matrix disagreement is essential in modelling; for instance, when traders agree on the covariance matrix, restricting participation in some securities for some traders leaves equilibrium prices unaltered in the unrestricted securities, a certainly undesirable model effect.