IDEAS home Printed from https://ideas.repec.org/a/eee/ecofin/v71y2024ics106294082400038x.html
   My bibliography  Save this article

Asymmetric information correlation in financial markets

Author

Listed:
  • Jiang, Ying
  • Liu, Hong
  • Yang, Qingshan

Abstract

This paper investigates a market model in which the exclusive information of the insider is correlated with the information of outsiders. Our findings suggest that increasing the degree of information correlation can improve market quality, enhancing market liquidity, market efficiency, and total trading volume. Additionally, the degree of information correlation increases the profits of outsiders and noise traders but reducing the profit of the insider. These results indicate that higher degree of information correlation is beneficial to market health, especially during period of economic crisis. Therefore, we suggest that the government and regulatory institutions expand the scope of information disclosure and ensure the accuracy of information disclosed. Furthermore, the study reveals that positive correlation leads to increased trading intensity for outsiders and decreased trading intensity for the insider. In contrast, negative correlation results in more complex changes in trading intensity for both groups due to belief inconsistency and intricate psychological reactions of traders to variations in information. Additionally, we provide an empirical analysis based on data from the Chinese market to support our findings.

Suggested Citation

  • Jiang, Ying & Liu, Hong & Yang, Qingshan, 2024. "Asymmetric information correlation in financial markets," The North American Journal of Economics and Finance, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:ecofin:v:71:y:2024:i:c:s106294082400038x
    DOI: 10.1016/j.najef.2024.102113
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S106294082400038X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.najef.2024.102113?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Insider trading; Information correlation; Information advantages; Noise traders;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecofin:v:71:y:2024:i:c:s106294082400038x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620163 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.