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Strategic Trading in Informationally Complex Environments

Lambert, Nicolas S. - 2015

competitive market makers, and the demand from liquidity traders. We show that there always exists a unique linear equilibrium … informational efficiency of prices as the number of strategic traders becomes large. If liquidity demand is positively correlated … demand is negatively correlated with the asset value, then prices in large markets aggregate all information except that …

Persistent link: https://www.econbiz.de/10013032405

Counterparty Risk Externality : Centralized Versus Over-the-Counter Markets

Acharya, Viral V. - 2011

We model the opacity of over-the-counter (OTC) markets in a setup where agents share risks, but have incentives to default and their financial positions are not mutually observable. We show that this setup results in excess "leverage" in that parties take on short OTC positions that lead to...

Persistent link: https://www.econbiz.de/10013125914

The Inefficient Markets Hypothesis : Why Financial Markets Do Not Work Well in the Real World

Farmer, Roger E. A. - 2012

Existing literature continues to be unable to offer a convincing explanation for the volatility of the stochastic discount factor in real world data. Our work provides such an explanation. We do not rely on frictions, market in completeness or transactions costs of any kind. Instead, we modify a...

Persistent link: https://www.econbiz.de/10013096129

On the Asset Market View of Exchange Rates

Burnside, A. Craig - 2012

If the asset market is complete then the difference between foreign and domestic agents' log intertemporal marginal rates of substitution (IMRSs) equals the log change in the real exchange rate. This equation is frequently used to argue that changes in real exchange rates reflect differences...

Persistent link: https://www.econbiz.de/10013096132

Efficiently Inefficient Markets for Assets and Asset Management

Garleanu, Nicolae - 2015

We consider a model where investors can invest directly or search for an asset manager, information about assets is costly, and managers charge an endogenous fee. The efficiency of asset prices is linked to the efficiency of the asset management market: if investors can find managers more...

Persistent link: https://www.econbiz.de/10013015107

The New Fama Puzzle

Bussière, Matthieu - 2018

correlated, contrary to what theory suggests – for eight advanced country exchange rates against the US dollar, over the period …

Persistent link: https://www.econbiz.de/10012927015

Information Acquisition, Efficiency, and Non-Fundamental Volatility

Hebert, Benjamin - 2020

This paper analyzes non-fundamental volatility and efficiency in a class of large games (including e.g. linear-quadratic beauty contests) that feature strategic interaction and endogenous information acquisition. We adopt the rational inattention approach to information acquisition but...

Persistent link: https://www.econbiz.de/10012840853

Stock Market Efficiency and Economic Efficiency : Is There a Connection?

Dow, James - 2008

In a capitalist economy prices serve to equilibrate supply and demand for goods and services, continually changing to …

Persistent link: https://www.econbiz.de/10012774997

Herd on the Street : Informational Inefficiencies in a Market with Short-Term Speculation

Froot, Kenneth - 2001

Standard models of informed speculation suggest that traders try to learn information that others do not have. This result implicitly relies on the assumption that speculators have long horizons, i.e, can hold the asset forever. By contrast, we show that if speculators have short horizons, they...

Persistent link: https://www.econbiz.de/10012787681

Long Run Growth of Financial Technology

Farboodi, Maryam - 2017

In most sectors, technological progress boosts efficiency. But financial technology and the associated data-intensive trading strategies have been blamed for market inefficiency. A key cause for concern is that better technology might induce traders to extract other's information from order flow...

Persistent link: https://www.econbiz.de/10012955436

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