|
Archive@NYU >
Stern School of Business >
Finance Working Papers >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27172
|
| Title: | Asset Price Dynamics and Infrequent Trades |
| Authors: | Balduzzi, Pierluigi
Bertola, Giuseppe
Foresi, Silverio |
| Issue Date: | Jan-1995 |
| Series/Report no.: | FIN-94-013 |
| Abstract: | We model an economy where stocks and bonds (consols) are traded by two
types of agents: speculators, expected utility maximizers always present
in the market, and infrequent traders, whose trading motives are not
explicitly modeled. A solution technique for equilibrium prices is
developed when trades are triggered by stock prices reaching some
threshold level, corresponding to a specific value of the dividend flow.
Across trade scenarios we find expectations of stock sales to depress
stock prices relative to the no-trade case, while expectations of stock
purchases tend to inflate them .both effects bring about
heteroskedasticity and predictability of stock returns. Our analysis
yields insights as to the equilibrium effects of a variety of trading
strategies, which mechanically generate market orders in response to
changes in stock prices. |
| URI: | http://hdl.handle.net/2451/27172 |
| Appears in Collections: | Finance Working Papers
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
