The Sale of Multiple Assets with Private Information

Posted: 8 Dec 2009

See all articles by Zhiguo He

Zhiguo He

University of Chicago - Finance

Multiple version iconThere are 2 versions of this paper

Date Written: November 2009

Abstract

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.

JEL Classification: D40, D82, G20

Suggested Citation

He, Zhiguo, The Sale of Multiple Assets with Private Information (November 2009). The Review of Financial Studies, Vol. 22, Issue 11, pp. 4787-4820, 2009. Available at SSRN: https://ssrn.com/abstract=1519263 or http://dx.doi.org/hhn119

Zhiguo He (Contact Author)

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://www.zhiguohe.com

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