We study price formation in securities markets, using the sequential trade framework of Glosten and Milgrom. This paper makes one basic methodological advance over previous research on sequential securities trading: we allow traders to choose from n trade sizes in a multi-period market, where n...

Collusive equilibria in share auctions despite being the focus of previous theoretical research, have received little empirical or experimental support. We develop a theoretical model of uniform price initial public offering (IPO) auctions and show that there exists a continuum of pure strategy...

The Paper presents a continuous-time model for the timing of riskless arbitrage when the mispricing between two equivalent portfolios varies stochastically through time under the exogenous impact of liquidity trades and persistent prospect that the arbitrage bubble can 'burst' .

We develop a model of insider trading where agents have private information either about liquidation value or about supply and behave strategically to maximize their profits. The supply informed trader plays a dual role in market making and in information revelation. This trader not only reveals...

The literature on private information as a source of trade is probably most well known via the seminal work by Jean Tirole and Paul Milgrom and Nancy Stokey. We consider an arbitrage opportunity to be the result of the existence of such private information. We are interested to propose a model...

This paper contributes empirically to our understanding of informed traders. It analyzes traders' characteristics in an electronic limit order market via anonymous trader identities. We use six indicators of informed trading in a cross-sectional multivariate approach to identify traders with...

Researchers who have examined markets populated by "robot traders" have claimed that the high level of allocative efficiency observed in experimental markets is driven largely by the "intelligence" implicit in the rules of the market. Furthermore, they view the ability of agents (artificial or...

This paper studies how the trade size and the historical sequence of trades affect bid-ask spreads, investors’ trading strategies, and the market maker’s learning process in a multi-period economy. First, we show that there is a nonzero cut-off size below which informed traders never buy or...

This paper analyzes two equivalent equilibrium notions under asymmetric information: risk neutral rational expectations equilibria (rn-REE), and common knowledge equilibria. We show that the set of fully informative rn-REE is a singleton, and we provide necessary and sufficient conditions for...

This paper argues that a guru possessing a multi-dimensional informational advantage may want to truthfully report her opinion to the media to learn more out of the actions of other, sometimes better-informed traders.