No Trade, Informed Trading, and Accuracy of Information
AbstractWe present a model in which there is uncertainty about realization of a risky asset value for an informed trader. Then, we show that the informed trader does not trade in equi- librium if the inside information the informed trader has is not sufficiently accurate. We use the framework presented by Glosten and Milgrom (1985) and extend the assumption that the informed trader knows the terminal value of the risky asset. Finally, we obtain the conditions under which the informed trader would not trade in equilibrium.
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Bibliographic InfoPaper provided by School of Economics, University of Queensland, Australia in its series Discussion Papers Series with number 411.
Date of creation: 2010
Date of revision:
Other versions of this item:
- Shino Takayama & Jayanaka Wijeratne, 2011. "No Trade, Informed Trading, and Accuracy of Information," Economics Bulletin, AccessEcon, vol. 31(2), pages 1313-1321.
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-09 (All new papers)
- NEP-CTA-2010-10-09 (Contract Theory & Applications)
- NEP-MST-2010-10-09 (Market Microstructure)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jones, Charles M & Kaul, Gautam & Lipson, Marc L, 1994. "Transactions, Volume, and Volatility," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 7(4), pages 631-51.
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