Abstract

http://ssrn.com/abstract=7612
 
 

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Risk Aversion, Liquidity, and Endogenous Short Horizons


Avanidhar Subrahmanyam


University of California, Los Angeles (UCLA) - Finance Area; Centre for International Finance and Regulation (CIFR)

Craig W. Holden


Indiana University - Kelley School of Business - Department of Finance


REVIEW OF FINANCIAL STUDIES, Vol. 9 No. 2

Abstract:     
We analyze a competitive model in which different information signals get reflected in value at different points in time. If investors are sufficiently risk averse, we obtain an equilibrium in which all investors focus exclusively on the short-term. In addition, we show that increasing the variance of informationless trading increases market depth but causes a greater proportion of investors to focus on the short-term signal, which decreases the informativeness of prices about the long-run. Finally, we also explore parameter spaces under which long-term informed agents wish to voluntarily disclose their information.

JEL Classification: D40, D82, G14

Accepted Paper Series





Not Available For Download

Date posted: July 24, 1996  

Suggested Citation

Subrahmanyam, Avanidhar and Holden, Craig W., Risk Aversion, Liquidity, and Endogenous Short Horizons. REVIEW OF FINANCIAL STUDIES, Vol. 9 No. 2. Available at SSRN: http://ssrn.com/abstract=7612

Contact Information

Avanidhar Subrahmanyam
University of California, Los Angeles (UCLA) - Finance Area ( email )
Los Angeles, CA 90095-1481
United States
310-825-5355 (Phone)
310-206-5455 (Fax)
Centre for International Finance and Regulation (CIFR) ( email )
Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Craig W. Holden (Contact Author)
Indiana University - Kelley School of Business - Department of Finance ( email )
Kelley School of Business
1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3383 (Phone)
812-855-5875 (Fax)
HOME PAGE: http://www.kelley.iu.edu/cholden

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