Adverse selection and the required return

• 成果类型: Article
• 署名作者: Gârleanu, N; Pedersen, LH
• 署名单位: New York University; University of Pennsylvania
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhg032
• 发表日期: 2004
• 页码: 643
• 关键词: RATIONAL-EXPECTATIONS ECONOMY; Bid-ask spread; transaction costs; asset prices; Liquidity premium; trading volume; INFORMATION; MARKETS; equilibrium; MODEL

摘要

An important feature of financial markets is that securities are traded repeatedly by asymmetrically informed investors. We study how current and future adverse selection affect the required return. We find that the bid-ask spread generated by adverse selection is not a cost, on average, for agents who trade, and hence the bid-ask spread does not directly influence the required return. Adverse selection contributes to trading-decision distortions, however, implying allocation costs, which affect the required return. We explicitly derive the effect of adverse selection on required returns, and show how our result differs from models that consider the bid-ask spread to be an exogenous cost.