Asymmetric information and survival in financial markets
AbstractIn the evolutionary setting for a financial market developed by Blume and Easley (1992), we consider an infinitely repeated version of a model á la Grossman and Stiglitz (1980) with asymmetrically informed traders. Informed traders observe the realisation of a payoff relevant signal before making their portfolio decisions. Uninformed traders do not have direct access to this kind of information, but can partially infer it from market prices. As a counterpart for their privileged information, informed traders pay a per period cost. As a result, information acquisition triggers a trade-off in our setting. We prove that, so long as information is costly, uninformed traders survive. Copyright Springer-Verlag Berlin/Heidelberg 2005
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 25 (2005)
Issue (Month): 2 (02)
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Other versions of this item:
- Sciubba, E., 1999. "Asymmetric Information and Survival in Financial Markets," Cambridge Working Papers in Economics 9908, Faculty of Economics, University of Cambridge.
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
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