MODULATED INFORMATION FLOWS IN FINANCIAL MARKETS

Modelling Information Flows in Financial Markets

This paper presents an overview of information-based asset pricing. In the information-based approach, an asset is defined by its cash-flow structure. The market is assumed to have access to “partial” information about future cash flows. Each cash flow is determined by a collection of independent market factors called X-factors. The market filtration is generated by a set of information process...

Using transfer entropy to measure information flows between financial markets

We use transfer entropy to quantify information flows between financial markets and propose a suitable bootstrap procedure for statistical inference. Transfer entropy is a model-free measure designed as the Kullback-Leibler distance of transition probabilities. Our approach allows to determine, measure and test for information transfer without being restricted to linear dynamics. In our empiric...

Markets for Financial Information

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 ...