Profitable Informed Trading in a Simple General Equilibrium Model of Asset Pricing

This paper presents a simple general equilibrium model of asset pricing in which profitable informed trading can occur without any "noise" added to the model. It shows that models of profitable informed trading must restrict the portfolio choices of uninformed traders: in particular, they cannot buy the market portfolio. In this model, profitable informed trading lowers the welfare of all agents when compared across steady states.

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Year of publication:	1993-04
Authors:	Dow, James ; Gorton, Gary
Institutions:	National Bureau of Economic Research (NBER)

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Extent:	application/pdf
Series:	NBER Working Papers.
Type of publication:	Book / Working Paper
Notes:	AP published as Journal of Economic Theory, Vol. 67, no. 2 (December 1995): 327-369. Number 4315
Classification:	G12 - Asset Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005714566