Short-term investment and equilibrium multiplicity |
| |
Authors: | Giovanni Cespa |
| |
Institution: | Departament d'Economia i Empresa, Universitat Pompeu Fabra, Ramon Trias Fargas, 25-27, E-08005 Barcelona, Spain |
| |
Abstract: | I study the effects of the heterogeneity of traders’ horizons in a 2-period NREE model where all traders are risk averse. Owing to risk premia, short-termism generates multiple equilibria. In particular two distinct patterns arise. Along the “low trading intensity equilibrium,” short termists anticipate a thinner second period market and, owing to risk aversion, scale back their trades. This reduces both risk sharing and information impounding into prices, enforcing a high returns’ volatility-low price informativeness equilibrium. Along the “high trading intensity equilibrium,” the opposite happens and a low volatility-high price informativeness equilibrium arises. Thus, in the presence of short-term behavior and traders’ risk aversion, periods of high volatility are a signal of poor price informativeness. |
| |
Keywords: | G100 G120 G140 |
本文献已被 ScienceDirect 等数据库收录! |
|