TY  - SER
AU  - Caskey,Judson
AU  - Hughes,John S.
AU  - Liu,Jun
TI  - Strategic informed trades, diversification and expected returns
KW  - Contabilidad
KW  - Publicaciones seriadas
KW  - Tasa de retorno
KW  - Diversificación en la industria
N2  - We examine how strategic trade affects expected returns in a large economy. In our model, both a monopolist (strategic) informed trader and uninformed traders consider the impact of their demands on prices. In contrast to settings with price-taking traders, private information never eliminates a priced risk, and can lead to higher risk premiums. Also unlike settings with price-taking informed traders, risk premiums decrease in response to an increase in liquidity-motivated trades in diversified portfolios. These differing effects arise because a privately informed strategic trader conceals her trades by taking small positions relative to the magnitude of noise trades. Although prices partially reveal her information and reduce uncertainty, a concomitant decrease in her risk absorption dominates and leads to higher risk premiums. Similar to settings with price-taking traders, private information affects expected returns only via factor loadings and risk premiums on existing payoff risks—it introduces no new priced risks, and factor loadings (betas) explain all cross-sectional differences in expected returns
ER  -