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...

We find that weekend, holiday and overnight trading breaks generate excessive perceived risk in the option markets, presumably due to asymmetric information, which, in turn, encourages uninformed option traders to postpone trading. This perceived risk subsides after two days accompanied by an...

In contrary to previous literature, we show in the Grossman-Stiglitz model of noisy rational expectation that the social value of asymmetric information can be improved with more informative prices when being informed is uncertain. Investors always benefit from a privately payoff-relevant...

We study information acquisition in dealer markets. We first identify a one-sided strategic complementarity in information acquisition: the more informed traders are, the larger market makers' gain from becoming informed. When quotes are observable, this effect in turn induces a strategic...

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...

The paper contrasts theories that explain diverse belief by asymmetric private information (in short PI) with theories which postulate agents use subjective heterogenous beliefs (in short HB). We focus on problems where agents forecast aggregates such as profit rate of the Samp;P500 and our...

We propose the Volume Coefficient of Variation (VCV), the ratio of the standard deviation to the mean of trading volume, as a new and easily computable measure of information asymmetry in security markets. We use a simple microstructure model to demonstrate that VCV is strictly increasing in the...

The objective of this paper was to analyze the effect of competition over better information on the cost of equity capital of Brazilian firms that trade their shares at the BM&FBovespa. The theoretical framework used models to analyze the expectations equilibrium when the information is not...

We propose a portfolio optimization approach to identifying private information. In our model, investors are exposed to liquidity and private information shocks and optimize their trading across stocks taking into account price impact (Kyle's Lambda). We obtain a very simple expression for a...