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Can public information promote market stability?

Author

Listed:
  • Chen, Binbin
  • Liu, Shancun
  • Zhang, Qiang

Abstract

We study the effect of public information revealing part of underlying fundamentals on market stability. It shows that accurate public information reduces the uncertainty faced by informed traders and increases their responsiveness to private information and expected volume. The reverse trading and multiple equilibria arise under lower public information precision and they disappear when public information precision increases sufficiently.

Suggested Citation

  • Chen, Binbin & Liu, Shancun & Zhang, Qiang, 2016. "Can public information promote market stability?," Economics Letters, Elsevier, vol. 143(C), pages 103-106.
    • Handle: RePEc:eee:ecolet:v:143:y:2016:i:c:p:103-106
    DOI: 10.1016/j.econlet.2016.04.008
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    More about this item

    Keywords

    Information disclosure; Public information; Multiple equilibria; Reverse trading;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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