Asymmetric Information and Financial Markets

Asymmetric Information and Survival in Financial Markets

In the evolutionary setting for a …nancial market developed by Blume and Easley (1992), we consider an in…nitely repeated version of a model à la Grossman and Stiglitz (1980) with asymmetrically informed traders. Informed traders observe the realisation of a payo¤ relevant signal before making their portfolio decisions. Uninformed traders do not have direct access to this kind of information, b...

Markets for Financial Information

Financial Markets with Asymmetric Information: Information Drift, Additional Utility and Entropy

We review a general mathematical link between utility and information theory appearing in a simple financial market model with two kinds of small investors: insiders, whose extra information is stored in an enlargement of the less informed agents’ filtration. The insider’s expected logarithmic utility increment is described in terms of the information drift, i.e. the drift one has to eliminate ...

Information Dispersion in Financial Markets

Public disclosures can level information asymmetry in financial markets by removing informed traders’ advantage, or can exacerbate asymmetry by further increasing these traders’ knowledge of the firm. This study finds evidence of the latter phenomenon in earnings conference calls, where management releases new information, and financial analysts on the call immediately respond and question mana...

Information Communication in Financial Markets∗

Empirical evidence shows word-of-mouth communication has real effects on trading patterns in financial markets. On top of that, the social network through which the information conveys also plays a crucial role. We propose a framework that allows informed traders to directly and truthfully communicate information in four major social interaction structures represented by circle, tree, star and ...