Date of Original Version

9-9-2015

Type

Working Paper

Abstract or Description

This paper investigates the equilibrium interactions between trading targets and private information in a multi-period Kyle (1985) market. There are two heterogenous investors who each follow dynamic trading strategies: A strategic portfolio rebalancer engages in order splitting to reach a cumulative trading target, and an unconstrained strategic insider trades on long-lived information. We consider a baseline case in which the rebalancer is initially uninformed and also cases in which the rebalancer is initially partially informed. We characterize a linear Bayesian Nash equilibrium, describe an algorithm for computing such equilibria, and present numerical results on properties of these equilibria

Included in

Mathematics Commons

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