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Asymmetric information and economics

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  • Frieden, B. Roy
  • Hawkins, Raymond J.
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    Abstract

    We present an expression of the economic concept of asymmetric information with which it is possible to derive the dynamical laws of an economy. To illustrate the utility of this approach we show how the assumption of optimal information flow leads to a general class of investment strategies including the well-known Q theory of Tobin. Novel consequences of this formalism include a natural definition of market efficiency and an uncertainty principle relating capital stock and investment flow.

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    Bibliographic Info

    Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

    Volume (Year): 389 (2010)
    Issue (Month): 2 ()
    Pages: 287-295

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    Handle: RePEc:eee:phsmap:v:389:y:2010:i:2:p:287-295

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    Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

    Related research

    Keywords: Asymmetric information; Fisher information; EPI; Economics; Q theory; Market efficiency;

    References

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    Cited by:
    1. Tilles, Paulo F.C. & Ferreira, Fernando F. & Francisco, Gerson & Pereira, Carlos de B. & Sarti, Flavia M., 2011. "A Markovian model market—Akerlof’s lemons and the asymmetry of information," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(13), pages 2562-2570.
    2. Hawkins, Raymond J. & Aoki, Masanao & Roy Frieden, B., 2010. "Asymmetric information and macroeconomic dynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(17), pages 3565-3571.

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