Strategic trading in a dynamic noisy market

Dimitri Vayanos

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

JEL-codes: F3 G3 (search for similar items in EconPapers)
Date: 2001-02
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Citations: View citations in EconPapers (45)

Published in Journal of Finance, February, 2001, 56(1), pp. 131-171. ISSN: 1540-6261

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Related works:
Journal Article: Strategic Trading in a Dynamic Noisy Market (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:447

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