Competitive Markets and Aggregate Information
This paper shows that a competitive market structure is identically efficient to a Walrasian rational expectations market when risk-averse agents base trades only on unbiased private signals. Because price reflects the complete set of market information, it is a sufficient statistic. The economic role of competing market makers is thus to aggregate information efficiently.
Volume (Year): 29 (2003)
Issue (Month): 4 (Fall)
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References listed on IDEAS
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- Grossman, Sanford J & Stiglitz, Joseph E, 1980.
"On the Impossibility of Informationally Efficient Markets,"
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- Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
- repec:hrv:faseco:30747159 is not listed on IDEAS
- De Bondt, Werner F M & Thaler, Richard, 1985. " Does the Stock Market Overreact?," Journal of Finance, American Finance Association, vol. 40(3), pages 793-805, July.
- Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November. Full references (including those not matched with items on IDEAS)
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