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Information in financial markets : how private information affects prices, how it can be revealed and how it may be used
| Content Provider | Semantic Scholar |
|---|---|
| Author | Sirnes, Espen |
| Copyright Year | 2008 |
| Abstract | In this paper it is shown that noise traders in dynamic equilibrium models with asymmetric information are necessary for information to have value under fairly general assumptions, unless uninformed investors are forced to make state dependent bids. The result is obtained by setting up a general linear model where investors are allowed to condition on any previous price in history and where the supply function has a general form. This enables us to compare the very different models of Shapley and Shubik (SS) and Grossman and Stigtlitz (GS) and allows a comprehensive study of the effect of past prices on conditional expectations. It is found that; 1) if uninformed investors cannot condition on current prices, they will not use past prices, 2) this dynamic version of GS with unobservable current prices has a Nash Equilibrium, 3) the SS model requires state dependent bids, e.g. bids in terms of portfolio cost. 4) if current prices are observable then investors may condition on the complete price history and as proved by Dubey, Geanakoplos, and Shubik (1987) there is no NE. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | https://munin.uit.no/bitstream/handle/10037/2407/thesis.pdf;jsessionid=FF226C091D1D651AE09D7E6B62B68E0A?sequence=1 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
