Informed Trading and Portfolio Returns

• 成果类型: Article
• 署名作者: Boulatov, Alex; Hendershott, Terrence; Livdan, Dmitry
• 署名单位: University of Houston System; University of Houston; University of California System; University of California Berkeley
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rds020
• 发表日期: 2013
• 页码: 35-72
• 关键词: cross-autocorrelations; MARKET; INFORMATION; speculation; COMPETITION; prices

摘要

We solve a multi-period model of strategic trading with long-lived information in multiple assets with correlated innovations in fundamental values. Market makers in each asset can only condition their pricing functions on trading in each asset. Using daily non-public data from the New York Stock Exchange, we test the model's predictions on the conditional and unconditional lead-lag relations of institutional order flow and returns within portfolios. We find support for the model prediction of positive autocorrelations in portfolio returns as well as the predictions for how informed order flow positively predicts future returns and future informed order flow. We show that these relations strengthen for portfolios formed from assets within the same industry, which likely have higher correlation of fundamental values. Furthermore, we discuss issues that arise when testing implications of strategic models with imperfect proxies for the underlying strategic behaviour.