Skip to main content

Research Repository

Advanced Search

Cross-asset speculation in stock markets

Bernhardt, D.; Taub, B.

Authors

D. Bernhardt

B. Taub



Abstract

In practice, heterogeneously informed speculators combine private information about multiple stocks with information in prices, taking into account how their trades influence the inferences of other speculators via prices. We show how this speculation causes prices to be more correlated than asset fundamentals, raising price volatility. The covariance structure of asset fundamentals drives that of prices, while the covariance structure of liquidity trade drives that of order flows. We characterize how speculator profits vary with the distributions of information and liquidity trade across assets and speculators, and relate the cross-asset factor structure of order flows to that of returns.

Citation

Bernhardt, D., & Taub, B. (2008). Cross-asset speculation in stock markets. Journal of Finance, 63(5), 2385-2427. https://doi.org/10.1111/j.1540-6261.2008.01400.x

Journal Article Type Article
Publication Date Oct 1, 2008
Deposit Date Jul 20, 2011
Journal Journal of Finance
Print ISSN 0022-1082
Electronic ISSN 1540-6261
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 63
Issue 5
Pages 2385-2427
DOI https://doi.org/10.1111/j.1540-6261.2008.01400.x
Public URL https://durham-repository.worktribe.com/output/1538528

You might also like



Downloadable Citations