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A Characterization of the Distributions That Imply Existence of Linear Equilibria in the Kyle-Model

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Author Info
Georg Nöldeke (Department of Economics, University of Bonn, Adenauerallee 24-42, D-53113 Bonn, Germany)
Thomas Tröger (Department of Economics, University of Bonn, Adenauerallee 24-42, D-53113 Bonn, Germany)

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Abstract

The existence of a linear equilibrium in Kyle's model of market making with multiple, symmetrically informed strategic traders is implied for any number of strategic traders if the joint distribution of the underlying exogenous random variables is elliptical. The reverse implication has been shown for the case in which the random variables are independent and have finite second moments. Here we extend this result to the case in which the underlying random variables are not necessarily independent and their joint distribution is determined by its moments.

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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number 43.

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Date of creation: May 2005
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Handle: RePEc:trf:wpaper:43

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Keywords: Market Microstructure Kyle Model Linear

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Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

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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.:
  1. Rochet, Jean-Charles & Vila, Jean-Luc, 1994. "Insider Trading without Normality," Review of Economic Studies, Blackwell Publishing, vol. 61(1), pages 131-52, January. [Downloadable!] (restricted)
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  2. Foster, F Douglas & Viswanathan, S, 1993. "The Effect of Public Information and Competition on Trading Volume and Price Volatility," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 6(1), pages 23-56. [Downloadable!] (restricted)
  3. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November. [Downloadable!] (restricted)
  4. Georg Nöldeke & Thomas Tröger, 2004. "On the Existence of Linear Equilibria in the Rochet-Vila Model of Market Making," Bonn Econ Discussion Papers bgse19_2004, University of Bonn, Germany. [Downloadable!]
  5. Georg Nöldeke & Thomas Tröger, 2001. "Existence of Linear Equilibria in the Kyle Model with Multiple Informed Traders," Bonn Econ Discussion Papers bgse1_2001, University of Bonn, Germany. [Downloadable!]
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