Abstract
We model a stock market with multiple stocks in a dynamic setting. Multiple informed traders receive new and heterogeneous information about the stocks in each period and use this information strategically. We characterize the decay rate of the information as it is incorporated into prices. The presence of multiple assets speeds information release by providing more channels for market makers to acquire information and incorporate that information in prices. The result is not only that profits are reduced in multi-asset settings, but that information release tilts toward new information relative to old information, reducing the profits that can be acquired by privately informed traders.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 43-82 |
| Number of pages | 40 |
| Journal | Finance and Stochastics |
| Volume | 12 |
| Issue number | 1 |
| DOIs | |
| State | Published - Jan 1 2008 |
Keywords
- Frequency-domain methods
- Information dynamics
- Multi-asset pricing
- Strategic information