Articles

Equilibrium Asset Pricing and Portfolio Choice Under Asymmetric Information

B. BIAIS, P. BOSSAERTS, C. SPATT

Review of Financial Studies

avril 2010, vol. 23, n°4, pp.1503-1543

Départements : Finance

Mots clés : Asset Pricing; Trading volume; Bond Interest Rates - Portfolio Choice; Investment Decisions - Financial Markets - Information and Market Efficiency; Event Studies; Insider Trading

https://academic.oup.com/rfs/article/23/4/1503/1592566


We analyze theoretically and empirically the implications of information asymmetry for equilibrium asset pricing and portfolio choice. In our partially revealing dynamic rational expectations equilibrium, portfolio separation fails, and indexing is not optimal. We show how uninformed investors should structure their portfolios, using the information contained in prices to cope with winner’s curse problems. We implement empirically this pricecontingentportfolio strategy. Consistent with our theory, the strategy outperforms economically and statistically the index. While momentum can arise in the model, in the data, the momentum strategy does not outperform the price-contingent strategy, as predicted by the theory


JavaScriptSettings