We study how dynamic research affects information acquisition in financial markets. In our strategic trading model, the trader performs costly research to generate private information but does not always succeed. Optimal research activity responds to market conditions and generates novel...

This paper introduces a theory of market incompleteness based on the information transmission role of prices and its adverse impact on the provision of insurance in financial markets. We analyse a simple security design model in which the number and payoff of securities are endogenous. Agents...

In a multi-asset market where agents have both payoff and supply signals, the rational expectations equilibria with partially revealing prices are characterized by an algebraic Riccati equation. The equation states that asset prices’ payoff informativeness equals the aggregation of...

We develop a model of dealer-intermediated over-the-counter (OTC) markets in which customers choose their relationship dealers and dealers choose their levels of expertise, thereby determining the market structure and price informativeness jointly. We find that, in general, multiple equilibria...

This paper studies the role of information acquisition in propagating/stabilizing uncertainty shocks in a dynamic financial market.In a static world, uncertainty raises the value of information, which encourages more information acquisition. In a dynamic world, however, uncertainty can depress...

Using intraday data, we identify the intensity of private information flow in the U.S. Treasury market. Our results show that the intensity of private information flow is highly correlated with public information shocks and higher for longer maturity bonds. More importantly, we find that bond...

We develop a model to study the observability of investors' information acquisition in financial markets. Relative to observable information acquisition, unobservable information acquisition leads to more information production if and only if the ratio of the information-acquisition cost to...

Information disclosure is an essential component of regulation in financial markets. In this article, we provide a cohesive analytical framework to review a few key channels through which disclosure in financial markets affects market quality, information production, efficiency of real...

How effectively does a decentralized marketplace aggregate information that is dispersed throughout the economy? We study this question in a dynamic setting where sellers have private information that is correlated with an unobservable aggregate state. In any equilibrium, each seller's trading...