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Strategic trading in a dynamic noisy market

Vayanos, Dimitri (2001) Strategic trading in a dynamic noisy market. Journal of Finance, 56 (1). pp. 131-171. ISSN 1540-6261

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Abstract

This paper studies a dynamic model of a nancial market with a strategic trader. In each period the strategic trader receives a privately observed endowment in the stock. He trades with competitive market makers to share risk. Noise traders are present in the market. After receiving a stock endowment, the strategic trader is shown to reduce his risk exposure either by selling at a decreasing rate over time, or by selling and then buying back some of the shares sold. When the time between trades is small, the strategic trader reveals the information regarding his endowment very quickly.

Item Type: Article
Official URL: http://www.blackwellpublishing.com/journals/JOF
Additional Information: This is an electronic version of an Article published in the Journal of finance 56 (1) pp. 131-171 © 2001 Blackwell Publishing. LSE has developed LSE Research Online so that users may access research output of the School. Copyright © and Moral Rights for the papers on this site are retained by the individual authors and/or other copyright owners. Users may download and/or print one copy of any article(s) in LSE Research Online to facilitate their private study or for non-commercial research. You may not engage in further distribution of the material or use it for any profit-making activities or any commercial gain. You may freely distribute the URL (http://eprints.lse.ac.uk) of the LSE Research Online website.
Library of Congress subject classification: H Social Sciences > HG Finance
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 09 Nov 2005
URL: http://eprints.lse.ac.uk/447/

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