IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Information Revelation and Market Incompleteness

  • Jose Marin
  • Rohit Rahi

\documentstyle[portada,11pt]{article} This paper shows that the presence of private information in an economy can be a source of market incompleteness even when it is feasible to issue a set of securities that completely eliminates the informational asymmetries in equilibrium. We analyze a simple security design model in which a volume maximizing futures exchange chooses not only the characteristics of each individual contract but also the number of contracts. Agents have rational expectations and differ in information, endowments and, possibly, attitudes toward risk. The emergence of complete or incomplete markets in equilibrium depends on whether the {\it adverse selection effect} is stronger or weaker than the {\it Hirshleifer effect}, as new securities are issued and prices reveal more information. When the Hirshleifer effect dominates, the exchange chooses an incomplete set of financial contracts, and the equilibrium price is partially revealing.

(This abstract was borrowed from another version of this item.)

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
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.

Paper provided by Birkbeck, Department of Economics, Mathematics & Statistics in its series Archive Working Papers with number 024.

as
in new window

Length:
Date of creation: Aug 1996
Date of revision:
Handle: RePEc:bbk:bbkifr:024
Contact details of provider: Postal: Malet Street, London WC1E 7HX, UK
Phone: 44-20- 7316429
Fax: 44-20- 7316416
Web page: http://www.ems.bbk.ac.uk/

Order Information: Email:


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.:

as in new window
  1. Bhattacharya Utpal & Reny Philip J. & Spiegel Matthew, 1995. "Destructive Interference in an Imperfectly Competitive Multi-Security Market," Journal of Economic Theory, Elsevier, vol. 65(1), pages 136-170, February.
  2. Allen, Franklin & Gale, Douglas, 1991. "Arbitrage, Short Sales, and Financial Innovation," Econometrica, Econometric Society, vol. 59(4), pages 1041-68, July.
  3. Franklin Allen & Douglas Gale, 1990. "Incomplete Markets and Incentives to Set Up an Options Exchange*," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 15(1), pages 17-46, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bbk:bbkifr:024. 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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.