Information and Trading Targets in a Dynamic Market Equilibrium
Trading and Market Microstructure
2015-09-09 v3 General Finance
Abstract
This paper investigates the equilibrium interactions between trading targets and private information in a multi-period Kyle (1985) market. There are two investors who each follow dynamic trading strategies: A strategic portfolio rebalancer who engages in order splitting to reach a cumulative trading target and an unconstrained strategic insider who trades on long-lived information. We consider cases in which the constrained rebalancer is partially informed as well as the special case in which the rebalancer is ex ante uninformed. We derive a linear Bayesian Nash equilibrium, describe an algorithm for computing such equilibria, and present numerical results on properties of these equilibria.
Keywords
Cite
@article{arxiv.1502.02083,
title = {Information and Trading Targets in a Dynamic Market Equilibrium},
author = {Jin Hyuk Choi and Kasper Larsen and Duane J. Seppi},
journal= {arXiv preprint arXiv:1502.02083},
year = {2015}
}