Common Factors, Information, and Holdings Dispersion

We derive closed-form solutions for asset prices and portfolio holdings when agents have asset-specific information and/or information about common components that affect many assets. Our solutions are general, encompass existing information structures, and are used to analyze new structures. A given investor’s portfolio can exhibit highly disperse holdings—e.g., portfolio weights may vary significantly from market capitalization weights. Our model also generates large ranges of asset prices due to information asymmetries. We help explain why US investors (e.g.) may underweight German stocks (e.g.) on average, but overweight a particular German stock relative to its market capitalization weight.

Références

Titre
Common Factors, Information, and Holdings Dispersion
Type de publication
Article de revue
Année de publication
2017
Revue
Review of Finance
Volume
22
Ticket
4
Pagination
1441-1467
Date de publication
juin
Soumis le 17 septembre 2018