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Asymmetries of information in centralized order-driven markets


  • BOCCARD, Nicolas

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium and Université de Liège)

  • CALCAGNO, Riccardo

    () (Center for Operations Research and Econometrics (CORE) and Institut de Recherches Economiques et Sociales, Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)


We study the efficiency of the equilibrium price in a centralized, orderdriven market where many asymmetrically informed traders are active for many periods. We show that asymmetries of information can lead to suboptimal information revelation with respect to the symmetric case. In particular, we assess that the more precise the information the higher the incentive to reveal it, and that the value of private information is related to the volume of exogenous trade present on the market. Moreover, we prove that any informed trader, whatever his information, reveals its private signal during an active phase of the market, concluding that long pre-opening phases are not effective as an information discovering device in the presence of strategic players.

Suggested Citation

  • BOCCARD, Nicolas & CALCAGNO, Riccardo, 1999. "Asymmetries of information in centralized order-driven markets," CORE Discussion Papers 1999035, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:1999035

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    References listed on IDEAS

    1. Foster, F Douglas & Viswanathan, S, 1990. "A Theory of the Interday Variations in Volume, Variance, and Trading Costs in Securities Markets," Review of Financial Studies, Society for Financial Studies, vol. 3(4), pages 593-624.
    2. Admati, Anat R & Pfleiderer, Paul, 1991. "Sunshine Trading and Financial Market Equilibrium," Review of Financial Studies, Society for Financial Studies, vol. 4(3), pages 443-481.
    3. Kyle, Albert S & Wang, F Albert, 1997. " Speculation Duopoly with Agreement to Disagree: Can Overconfidence Survive the Market Test?," Journal of Finance, American Finance Association, vol. 52(5), pages 2073-2090, December.
    4. Spiegel, Matthew & Subrahmanyam, Avanidhar, 1992. "Informed Speculation and Hedging in a Noncompetitive Securities Market," Review of Financial Studies, Society for Financial Studies, vol. 5(2), pages 307-329.
    5. Vives Xavier, 1995. "The Speed of Information Revelation in a Financial Market Mechanism," Journal of Economic Theory, Elsevier, vol. 67(1), pages 178-204, October.
    6. Bhattacharya, Utpal & Spiegel, Matthew, 1991. "Insiders, Outsiders, and Market Breakdowns," Review of Financial Studies, Society for Financial Studies, vol. 4(2), pages 255-282.
    7. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
    8. Madhavan, Ananth, 1992. " Trading Mechanisms in Securities Markets," Journal of Finance, American Finance Association, vol. 47(2), pages 607-641, June.
    9. Albert S. Kyle, 1989. "Informed Speculation with Imperfect Competition," Review of Economic Studies, Oxford University Press, vol. 56(3), pages 317-355.
    10. Amihud, Yakov & Mendelson, Haim, 1987. " Trading Mechanisms and Stock Returns: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 42(3), pages 533-553, July.
    11. Bruno Biais & Pierre Hillion & Chester Spatt, 1999. "Price Discovery and Learning during the Preopening Period in the Paris Bourse," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1218-1248, December.
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    More about this item


    asymmetric information; pre-opening; insider trading;

    JEL classification:

    • D - Microeconomics
    • G - Financial Economics


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