Location
Room BZ E4.23, Universitätsplatz 1 - Piazza Università, 1, 39100 Bozen-Bolzano
Departments Press and Events
Contact
valerie.aloa@unibz.it
25 May 2022 12:30-12:30
Short-sightedness, Short-sale Constraints and the Dissemination of Private Information
Research Seminar Financial Markets and Reguations
Location
Room BZ E4.23, Universitätsplatz 1 - Piazza Università, 1, 39100 Bozen-Bolzano
Departments Press and Events
Contact
valerie.aloa@unibz.it
We develop a model of optimal dissemination of private information by a shortsighted raider within a market for a risky asset. Because the raider is risk-averse andatomistic, her trades cannot directly affect prices. In addition, because she is shortsighted she needs to liquidate her portfolio before the asset price fully reflects herprivate information. We establish that under these conditions she finds it optimal toreveal her private information on the risky asset in order to move the asset price in thedesired direction when her private information is either very bad or very good. Weprove that short-sale constraints affect the raider’s dissemination policy, in that whenthey are tight she is less likely to disclose her private signal. We establish a numberof empirical implications of the raider’s dissemination policy which are coherent withempirical evidence on the limits to arbitrage and the activity of dedicated short-biasfunds.
The seminar will be held both in presence and online @ this link