Equilibrium Block Trading and Asymmetric Information

Equilibrium Block Trading and Asymmetric Information

  • DUANE J. SEPPI

Article first published online: 30th April 2012 DOI: 10.1111/j.1540-6261.1990.tb05081.x

Abstract


This paper investigates the existence of equilibria with information‐based block trading in a multiperiod market when no investor is constrained to block trade. Attention is restricted to equilibria in which a strategic uninformed institution (i.e., one which is forced to rebalance its portfolio but is free to choose an optimal rebalancing strategy) is willing to trade a block rather than “break up” the block into a series of smaller trades. Examples of such equilibria are found and analyzed.

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