Strategic Behavior and Price Discovery
We analyze the effects of strategic behavior by a large informed trader in a price discovery process used in opening auctions in continuous trading systems. It is found that the large informed trader manipulates the market using a contrarian strategy to neutralize the effect of the trades of competitive informed agents. Furthermore, consistent with the empirical evidence available, we find that information revelation accelerates close to the opening, that the market price approaches but does not converge to the fundamental value, and that the expected trading volume displays a U-shaped pattern. Copyright 2001 by the RAND Corporation.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 32 (2001)
Issue (Month): 2 (Summer)
|Contact details of provider:|| Web page: http://www.rje.org|
|Order Information:||Web: https://editorialexpress.com/cgi-bin/rje_online.cgi|
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.:
- Jordan, J. S., 1982. "A dynamic model of expectations equilibrium," Journal of Economic Theory, Elsevier, vol. 28(2), pages 235-254, December.
- Holden, Craig W. & Subrahmanyam, Avanidhar, 1994. "Risk aversion, imperfect competition, and long-lived information," Economics Letters, Elsevier, vol. 44(1-2), pages 181-190.
- Benabou, R. & Laroque, G., 1988.
"Using Privileged Information To Manipulate Markets: Insiders, Gurus And Credibility,"
19, Princeton, Woodrow Wilson School - Discussion Paper.
- Benabou, Roland & Laroque, Guy, 1992. "Using Privileged Information to Manipulate Markets: Insiders, Gurus, and Credibility," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 921-58, August.
- Benabou, R. & Laroque, G., 1989. "Using Privileged Information To Manipulate Markets: Insiders, Gurus, And Credibility," Working papers 513, Massachusetts Institute of Technology (MIT), Department of Economics.
- Laffont, Jean-Jacques & Maskin, Eric S, 1990. "The Efficient Market Hypothesis and Insider Trading on the Stock Market," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 70-93, February.
- Charles Cao & Eric Ghysels & Frank Hatheway, 1998. "Why Is the Bid Price Greater than the Ask? Price Discovery during the Nasdaq Pre-Opening," CIRANO Working Papers 98s-14, CIRANO.
- Hart, Oliver D, 1977. "On the Profitability of Speculation," The Quarterly Journal of Economics, MIT Press, vol. 91(4), pages 579-97, November.
- Jarrow, Robert A., 1992. "Market Manipulation, Bubbles, Corners, and Short Squeezes," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(03), pages 311-336, September.
- Colin Camerer, 1998. "Can asset markets be manipulated? A field experiment with racetrack betting," Natural Field Experiments 00222, The Field Experiments Website.
- Kumar, Praveen & Seppi, Duane J, 1992. " Futures Manipulation with "Cash Settlement."," Journal of Finance, American Finance Association, vol. 47(4), pages 1485-502, September.
- Jordan, J. S., 1985. "Learning rational expectations: The finite state case," Journal of Economic Theory, Elsevier, vol. 36(2), pages 257-276, August.
- Fishman, Michael J & Hagerty, Kathleen M, 1995. "The Mandatory Disclosure of Trades and Market Liquidity," Review of Financial Studies, Society for Financial Studies, vol. 8(3), pages 637-76.
- Gould, John P & Verrecchia, Robert E, 1985. "The Information Content of Specialist Pricing," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 66-83, February.
- Colin F. Camerer, 1998. "Can Asset Markets Be Manipulated? A Field Experiment with Racetrack Betting," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 457-482, June.
- Rochet, Jean-Charles & Vila, Jean-Luc, 1994.
"Insider Trading without Normality,"
Review of Economic Studies,
Wiley Blackwell, vol. 61(1), pages 131-52, January.
- Ma, Ching-To Albert & Manove, Michael, 1993.
"Bargaining with Deadlines and Imperfect Player Control,"
Econometric Society, vol. 61(6), pages 1313-39, November.
- Ching-to Albert Ma & Michael Manove, 1991. "Bargaining with Deadlines and Imperfect Player Control," Papers 0007, Boston University - Industry Studies Programme.
- Madhavan, Ananth & Panchapagesan, Venkatesh, 2000. "Price Discovery in Auction Markets: A Look Inside the Black Box," Review of Financial Studies, Society for Financial Studies, vol. 13(3), pages 627-58.
- Back, Kerry, 1992. "Insider Trading in Continuous Time," Review of Financial Studies, Society for Financial Studies, vol. 5(3), pages 387-409.
- Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
- Keim, Donald B. & Madhavan, Ananth, 1995. "Anatomy of the trading process Empirical evidence on the behavior of institutional traders," Journal of Financial Economics, Elsevier, vol. 37(3), pages 371-398, 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.
When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:32:y:2001:i:2:p:221-48. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.