Through extending a standard Grossman and Stiglitz (1980) noisy rational expectations economy by a heterogeneous signal structure with signal-specific differences in uncertainty, we show that price momentum as well as reversal are not intrinsically at odds with rational behavior. Differences in...

Generalizing the idea that price momentum can be explained by different levels of uncertainty inherent in the information structure, we implement signal-specific differences in uncertainty in a Kyle type model of strategic trading. We derive the equilibrium in a single-auction setting as well as...

This paper aims to explore the relevance of the asymmetric information and the theory of argumentation TA in the complex area of financial crises. Specifically, we investigated the scope of the phenomenon of persuasion in advertising. It examines advertisements in publications notable economic...

Plott, Wit & Yang (2003) conduct a betting market experiment and find: First, information was aggregated. This suggests that traders updated their private information based on observed market odds. Second, a model based only on the use of private information seems to fit their data best. The...

This Article argues that information gaps—pockets of information that are pertinent and knowable but not currently known—are a byproduct of shadow banking and a meaningful source of systemic risk. It lays the foundation for this claim by juxtaposing the regulatory regime governing the shadow...

The Kyle (1985) model is extended to take into account market maker competition and the spread. It is shown that with a spread the Kyle model has a Nash equilibrium also with two market makers, not only with three or more, as shown in earlier research. The spread is endogenized, and two testable...

The goal of this paper is to study how informational frictions affect asset liquidity in OTC markets in a laboratory setting. The experiments replicate an OTC market similar to the one used in monetary and financial economics (Shi, 1995; Trejos and Wright, 1995; Duffie, Garleanu, and Pedersen, 2005):...

We study price efficiency and trading behavior in laboratory limit order markets with asymmetrically informed traders. Markets differ in the number of insiders present and in the subset of traders who receive information about the number of insiders present. We observe that price efficiency (i)...

We demonstrate that asymmetric information between sellers (loan originators) and purchasers (investors and securities issuers) of commercial mortgages gives rise to a standard “lemons problem”, whereby portfolio lenders use private information to liquidate lower quality loans in CMBS...