eprintid: 16497
rev_number: 33
eprint_status: archive
userid: 1482
importid: 105
dir: disk0/00/01/64/97
datestamp: 2015-03-16 14:43:08
lastmod: 2021-04-02 15:49:20
status_changed: 2018-03-14 10:14:55
type: article
succeeds: 15692
metadata_visibility: show
creators_name: Biais, Bruno
creators_name: Hombert, Johan
creators_name: Weill, Pierre-Olivier
creators_idrefppn: 031366147
creators_idrefppn: 175356823
creators_idrefppn: 175356637
title: Equilibrium Pricing and Trading Volume under Preference Uncertainty
ispublished: pub
subjects: subjects_ECO
abstract: Information collection, processing and dissemination financial institutions is challenging.
This can delay the observation by traders of the exact capital charges and constraints
of their institution. During this delay, traders face preference uncertainty. In
this context, we study optimal trading strategies and equilibrium prices in a continuous
centralized market. We focus on liquidity shocks, during which preference uncertainty is
likely to matter most. Preference uncertainty generates allocative ineficiency, but need
not reduce prices. Traders progressively learning about the preferences of their institution
conduct round-trip trades, which generate excess volume relative to the frictionless market.
In a cross section of liquidity shocks, the initial price drop is positively correlated with
total trading volume. Across traders, the number of round-trips is negatively correlated
with trading profits and average inventory.
date: 2014
date_type: published
publisher: Oxford University Press
id_number: 10.1093/restud/rdu008
official_url: http://tse-fr.eu/pub/27850
faculty: tse
divisions: tse
divisions: CRM
keywords: Information processing
keywords: Trading volume
keywords: Liquidity shock
keywords: Preference uncertainty
keywords: Equilibrium pricing
language: en
has_fulltext: TRUE
doi: 10.1093/restud/rdu008
subjectsJEL: JEL_D81
subjectsJEL: JEL_G12
view_date_year: 2014
full_text_status: public
publication: Review of Economic Studies
volume: vol.81
number: n°4
pagerange: 1401-1437
refereed: TRUE
issn: 0034-6527
oai_identifier: oai:tse-fr.eu:27850
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oai_lastmod: 2017-07-12T09:39:20Z
oai_set: tse
site: ut1
citation:   Biais, Bruno <https://www.idref.fr/031366147>, Hombert, Johan <https://www.idref.fr/175356823> and Weill, Pierre-Olivier <https://www.idref.fr/175356637>  (2014) Equilibrium Pricing and Trading Volume under Preference Uncertainty.    Review of Economic Studies, vol.81 (n°4).  pp. 1401-1437.       
document_url: https://publications.ut-capitole.fr/id/eprint/16497/1/bhw_dec2013pow.pdf