Concentrated Equilibrium and Intraday Patterns in Financial Markets

We introduce endogenous participation of market makers into a Kyle-type model with long-lived asymmetric information. The main result is that under a plausible parameter setting, the trading volume and price volatility show a U-shape with respect to time, meaning that the market trading concentrates at opening and closing sessions. Our model effectively provides a theoretical explanation on the stylized fact that trading concentration occurs at the opening and closing periods in financial markets