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Strategic Trading in a Dynamic Noisy Market
Article first published online: 17 DEC 2002
DOI: 10.1111/0022-1082.00321
The American Finance Association 2001
1540-6261/asset/cover.gif?v=1&s=5192ce61b1e4bde927ebc2df55b44b4da55ef137 "The Journal of Finance")
Additional Information
How to Cite
Vayanos, D. (2001), Strategic Trading in a Dynamic Noisy Market. The Journal of Finance, 56: 131–171. doi: 10.1111/0022-1082.00321
Publication History
- Issue published online: 17 DEC 2002
- Article first published online: 17 DEC 2002
- Abstract
- Cited By
This paper studies a dynamic model of a financial 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.