Informed Trading When Information Becomes Stale
This paper characterizes informed trade when speculators can acquire distinct signals of varying quality about an asset's value at different dates. The most reasonable characterization of private information about stocks is that while information is long-lived, new information will arrive over time, information that may be acquired by others. Hence, while a speculator may know more than others at a moment, in the future, his information will become stale, but not valueless. In an environment that allows for arbitrary correlations among signals, we characterize equilibrium outcomes including trading, prices, and profits. We provide explicit numerical characterizations for different informational environments. Copyright 2004 by The American Finance Association.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 59 (2004)
Issue (Month): 1 (February)
|Contact details of provider:|| Web page: http://www.afajof.org/|
More information through EDIRC
|Order Information:||Web: http://www.afajof.org/membership/join.asp|
References listed on IDEAS
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.:
- Raymond M. Brooks, 1994. "Bid-Ask Spread Components Around Anticipated Announcements," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(3), pages 375-386, 09.
- Grossman, Sanford J & Stiglitz, Joseph E, 1980.
"On the Impossibility of Informationally Efficient Markets,"
American Economic Review,
American Economic Association, vol. 70(3), pages 393-408, June.
- Sanford J Grossman & Joseph E Stiglitz, 1997. "On the Impossibility of Informationally Efficient Markets," Levine's Working Paper Archive 1908, David K. Levine.
- Krinsky, Itzhak & Lee, Jason, 1996. " Earnings Announcements and the Components of the Bid-Ask Spread," Journal of Finance, American Finance Association, vol. 51(4), pages 1523-1535, September.
- Brooks, Raymond M, 1994. "Bid-Ask Spread Components around Anticipated Announcements," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(3), pages 375-386, Fall.
- Baruch, Shmuel, 2002. "Insider trading and risk aversion," Journal of Financial Markets, Elsevier, vol. 5(4), pages 451-464, October.
- Holden, Craig W & Subrahmanyam, Avanidhar, 1992. " Long-Lived Private Information and Imperfect Competition," Journal of Finance, American Finance Association, vol. 47(1), pages 247-270, March.
- Foster, F. Douglas & Viswanathan, S., 1994. "Strategic Trading with Asymmetrically Informed Traders and Long-Lived Information," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(04), pages 499-518, December.
- Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
- Bernhardt, Dan & Hughson, Eric, 2002. "Intraday trade in dealership markets," European Economic Review, Elsevier, vol. 46(9), pages 1697-1732, October.
- Dan Bernhardt & Eric Hughson, 1991. "Intraday Trade in Dealership Markets," Working Papers 841, Queen's University, Department of Economics.
- Bernhardt, Dan & Hughson, Eric, 1993. "Intraday Trade in Dealership Markets," Working Papers 852, California Institute of Technology, Division of the Humanities and Social Sciences.
- I. Krinsky & J. Lee, 1996. "Earning Announcements and the Components of the Bid-Ask Aspread," Quantitative Studies in Economics and Population Research Reports 313, McMaster University.
- Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
- Foster, F Douglas & Viswanathan, S, 1996. " Strategic Trading When Agents Forecast the Forecasts of Others," Journal of Finance, American Finance Association, vol. 51(4), pages 1437-1478, September. Full references (including those not matched with items on IDEAS)