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The Sale of Multiple Assets With Private Information

Zhiguo He

University of Chicago - Booth School of Business, and NBER

July 11, 2008

AFA 2006 Boston Meetings
Review of Financial Studies, Forthcoming

By generalizing the Leland and Pyle (1977) model to the case of multiple correlated assets, this paper studies the signaling and hedging behavior of an intermediary who sells multiple assets in financial markets. Based on information asymmetry, this paper demonstrates the intrinsic interdependence of risk management and asset selling for intermediaries, and obtains several testable empirical implications. For instance, an intermediary with a more diversified underlying portfolio will face greater liquidity (a smaller price impact) when selling assets to the market. Several applications are discussed, including bank loan sales and selling mechanisms.

Number of Pages in PDF File: 37

Keywords: Cross-signalling, Multi-dimensional Pricing System, Risk Management, Bank Loan Sales.

JEL Classification: D40, D82, G20

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Date posted: March 25, 2005 ; Last revised: July 15, 2008

Suggested Citation

He, Zhiguo, The Sale of Multiple Assets With Private Information (July 11, 2008). AFA 2006 Boston Meetings; Review of Financial Studies, Forthcoming. Available at SSRN: http://ssrn.com/abstract=684128

Contact Information

Zhiguo He (Contact Author)
University of Chicago - Booth School of Business, and NBER ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
HOME PAGE: http://faculty.chicagobooth.edu/zhiguo.he/pubs.html

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