Trading Behaviour and Asset Pricing Under Heterogeneous Expectations  

Oleh:

Sartono, R. Agus

Jenis: Article from Journal - ilmiah nasional - tidak terakreditasi DIKTI
Dalam koleksi: International Journal of Business vol. 7 no. 1 (Jan. 2005), page 15-40.
Topik: trading; asset price behaviour; cash flow innovatons; heterogeneous expectations; informed traders; market depth

Ketersediaan

Perpustakaan Pusat (Semanggi) Nomor Panggil: II51.4 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

This research models trading behaviour and examines the impact of heterogeneous expectations on asset prices. We extend kyle's (1985) one - period model to two - period model. The model shows that the informed trader takes into account not only the private information but also the pricing function. The price is an increasing functions of the volatility of the asset value and decreasing in the volatility of uninformed traders' demand. The costly information acquisition has an impact on the optimum demand but it has no direct impact on the price. We find the market depth is a linear function of the volatility of the uninformed traders and a weighted average of the total error variance of information. The depth is also decreasing in the volatility of the cash flow innovations. This argument is in line with the second finding, when the volatility of cash flow innovations increases, the value of risky asset becomes more volatile, and as a result the bnigger are the advantages of having private information. Our research raises some questions for further investigation. We indirectly assume that the informed traders make a profit at the expense on the uninformed traders. The question is why the uninformed traders willing to face losses ? What happen if there are n informed traders who have diverse information ?

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