Cross-Asset Speculation in Stock MarketsÃ¢ÂˆÂ— - Econometrics at Illinois ...

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Figure 1: Expected profit for asymmetrically distributed information (θ = 0.75).1Aggregate profit0.6Observable priceUnobservable priceIsolated0.1 0.9Trader 1's share of informationΝ43
Figure 2: Trader-1 expected profit for asymmetrically distributed information.1Trader 1 profitObservable price0Unobservable price0.1 0.9Trader 1's share of informationΝ44
Page 1 and 2: Cross-Asset Speculation in Stock Ma
Page 3: ship model of Kyle (1985) and Admat
Page 6 and 7: We next set out the model and analy
Page 8 and 9: of net order flows. Specifically, w
Page 10 and 11: and defining γ i ≡ B i (I −
Page 12 and 13: (from Proposition 1) speculator i
Page 14 and 15: Unobservable prices. This theoretic
Page 16 and 17: 3, speculative trading intensities
Page 18 and 19: the off-diagonal term in Γ = Γ
Page 20 and 21: Substituting for λ 11 − c = λ 1
Page 22 and 23: isolates how the division of privat
Page 24 and 25: mation is highly correlated. Profit
Page 26 and 27: The increased competition between s
Page 28 and 29: of the less volatile asset’s valu
Page 30 and 31: V AppendixProof of Proposition 1. U
Page 32 and 33: under the trace yields{0 = tr= tr
Page 34 and 35: where once more we commute under th
Page 36 and 37: We now establish the contraction pr
Page 38 and 39: We substitute (24) for bAΣ e A ′
Page 40 and 41: We have⎛ ⎞V Σ e A ′ b ′
Page 42 and 43: ⎛( ) ⎛ ⎞⎛⎞⎞⎜ ⎜Σ e
Page 46 and 47: Figure 3: Trading intensities for a
Page 48 and 49: Figure 5: µ coefficients for asymm
Page 50 and 51: Figure 7: Trading intensity for asy
Page 52: VI ReferencesAdmati, Anat, 1985, A

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