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Making Money out of Publicly Available Information

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  • Alan Morrison

    ()

  • Nir Vulkan

    ()

Abstract

It is received financial wisdom that when there is free entry by speculators, it is impossible to generate net profits on publicly available information. In this paper we study a version of the standard Kyle (85) model with endogenous information acquisition and we find that equilibria exist with free entry in which speculators make positive profits. Moreover, these equilibria are robust.

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File URL: http://www.finance.ox.ac.uk/file_links/finecon_papers/2003fe07.pdf
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Bibliographic Info

Paper provided by Oxford Financial Research Centre in its series OFRC Working Papers Series with number 2003fe07.

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Date of creation: 2003
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Handle: RePEc:sbs:wpsefe:2003fe07

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Web page: http://www.finance.ox.ac.uk
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Keywords: Market maker model; beliefs; information accquisition;

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  1. Foster, F Douglas & Viswanathan, S, 1993. "The Effect of Public Information and Competition on Trading Volume and Price Volatility," Review of Financial Studies, Society for Financial Studies, vol. 6(1), pages 23-56.
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Cited by:
  1. Diego GarcĂ­a & Branko Urosevic, 2004. "Noise and aggregation of information in large markets," Economics Working Papers 785, Department of Economics and Business, Universitat Pompeu Fabra.

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