Hong, Harrison; Rady, Sven - Volkswirtschaftliche Fakultät, … - 2001
dilemma because of incomplete information about time-varying market liquidity. Unlike the competitive market makers that they … trade against, informed traders do not know whether the liquidity ( "noise") trades are generated from a distribution with … high or low variance. Instead, they have to learn about liquidity from past prices and trading volume. Extreme price …
