Strategic Informed Trades, Diversification, and Expected Returns

• 成果类型: Article
• 署名作者: Caskey, Judson; Hughes, John S.; Liu, Jun
• 署名单位: University of California System; University of California Los Angeles; University of California System; University of California San Diego
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-51026
• 发表日期: 2015
• 页码: 1811-1837
• 关键词: Information asymmetry; factor models; cost; disclosure; arbitrage; number; COMPETITION; QUALITY; equity

摘要

We examine how strategic trade affects expected returns in a large economy. In our model, both a monopolist (strategic) informed trader and uninformed traders consider the impact of their demands on prices. In contrast to settings with price-taking traders, private information never eliminates a priced risk, and can lead to higher risk premiums. Also unlike settings with price-taking informed traders, risk premiums decrease in response to an increase in liquidity-motivated trades in diversified portfolios. These differing effects arise because a privately informed strategic trader conceals her trades by taking small positions relative to the magnitude of noise trades. Although prices partially reveal her information and reduce uncertainty, a concomitant decrease in her risk absorption dominates and leads to higher risk premiums. Similar to settings with price-taking traders, private information affects expected returns only via factor loadings and risk premiums on existing payoff risks-it introduces no new priced risks, and factor loadings (betas) explain all cross-sectional differences in expected returns.