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Information and Trading Targets in a Dynamic Market Equilibrium

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  • Jin Hyuk Choi
  • Kasper Larsen
  • Duane J. Seppi

Abstract

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

Suggested Citation

  • Jin Hyuk Choi & Kasper Larsen & Duane J. Seppi, 2015. "Information and Trading Targets in a Dynamic Market Equilibrium," Papers 1502.02083, arXiv.org, revised Sep 2015.
    • Handle: RePEc:arx:papers:1502.02083
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    References listed on IDEAS

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