Dimitris Papadimitriou

Dimitris Papadimitriou

PhD candidate in Finance

Department of Finance

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About me

Research interests
Asset Pricing Theory (primary)
Market Microstructure, Financial Intermediation (secondary)

Job market paper
Trading Under Uncertainty about other Market Participants

Personal website

Read the abstract and download the paper

In this paper, we present an asymmetric information model of financial markets where traders are uncertain not only about fundamentals, but also about the composition of informed and noise traders in the market. Hedge fund managers use prices to update their beliefs about these uncertainties. The model generates a non-linear equilibrium, where price reacts asymmetrically to positive/negative news. Extreme news leads to higher uncertainty about fundamentals and lower price informativeness, while increased uncertainty about the market composition implies a lower perceived belief dispersion between traders, and higher expected returns. We study the model's behaviour under various distributional assumptions about the prior beliefs of agents, verify it fits well with many stylized facts about the volume-price relationship and extend to a dynamic model to discuss the return dynamics.

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Publications and additional papers

  • Sentiment and Speculation in a Market with Heterogeneous Beliefs (with I. Martin) (working paper)
  • The Effect of Market Conditions and Career Concerns in the Fund Industry (with K. Tokis, G. Vichos) (working paper)

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