Asymmetric information and survival in financial markets

Sciubba, Emanuela (2005) Asymmetric information and survival in financial markets. Economic Theory 25 (2), pp. 353-379. ISSN 0938-2259.

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Official URL: https://doi.org/10.1007/s00199-003-0434-8

Abstract

In the evolutionary setting for a financial market developed by Blume and Easley (1992), we consider an infinitely repeated version of a model á la Grossman and Stiglitz (1980) with asymmetrically informed traders. Informed traders observe the realisation of a payoff relevant signal before making their portfolio decisions. Uninformed traders do not have direct access to this kind of information, but can partially infer it from market prices. As a counterpart for their privileged information, informed traders pay a per period cost. As a result, information acquisition triggers a trade-off in our setting. We prove that, so long as information is costly, uninformed traders survive.

Metadata

Item Type:	Article
School:	Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
Depositing User:	Sarah Hall
Date Deposited:	27 Jul 2020 16:50
Last Modified:	02 Aug 2023 18:01
URI:	https://eprints.bbk.ac.uk/id/eprint/32693

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