Journal of Accounting and Economics Vol. 60 No. 2-3 2015
Delegated trade and the pricing of public and private information
open access
Abstract
We extend a standard, rational expectation model of trade to incorporate the possibility of individual investors delegating their trades to an informed financial intermediary. In the presence of delegated trade, we show that a firm׳s risk premium is a function of both the firm׳s exposure to a common risk factor and idiosyncratic characteristics of the firm׳s information environment. We show that even in a large economy, priced risks can manifest in the form of both idiosyncratic firm characteristics and common risk factors; as a consequence, factor-based asset pricing tests cannot rule out that a particular risk is priced.
- DOI
- 10.1016/j.jacceco.2015.07.002
- Volume
- 60
- Issue
- 2-3
- Pages
- 8-32
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref