Bullish/Bearish Strategies of Trading: A Nonlinear Equilibrium
We study a financial market where risk-neutral traders are endowed with a signal that perfectly reveals the direction (but not the exact amount) of the liquidation value of a normally distributed risky asset. The impact of order flow on prices is nonlinear with a bullish/bearish information structure, which is broadly consistent with empirical evidence. Also, private information is revealed quicker than in a strategic oligopoly.
Volume (Year): 39 (2004)
Issue (Month): 04 (December)
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