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A Sequential-trade Microstructure Model with Heterogeneous Information Sets

Economic Analysis Review

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Title A Sequential-trade Microstructure Model with Heterogeneous Information Sets
A Sequential-trade Microstructure Model with Heterogeneous Information Sets
 
Creator Kawamura, Enrique
 
Description I present two cases of sequential trade models of market microstructure with heterogeneous information partitions. First, the trader with information can infer the true value only under certain realizations. The main result is that the equilibrium outcomes look quite different from the literature, suggesting that the information assumptions may be a delicate issue to consider in these models. In the second example I adapt a non-partitional information approach from Geanakoplos (1989). When the informed investor does not observe this signal, she does not infer whether the value of the asset is low or high. Here positive spreads may not lead to trade.
I present two cases of sequential trade models of market microstructure with heterogeneous information partitions. First, the trader with information can infer the true value only under certain realizations. The main result is that the equilibrium outcomes look quite different from the literature, suggesting that the information assumptions may be a delicate issue to consider in these models. In the second example I adapt a non-partitional information approach from Geanakoplos (1989). When the informed investor does not observe this signal, she does not infer whether the value of the asset is low or high. Here positive spreads may not lead to trade.
 
Publisher Universidad Alberto Hurtado - Facultad de Economía y Negocios
 
Contributor —
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Date 2010-03-06
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
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Format application/pdf
 
Identifier http://www.rae-ear.org/index.php/rae/article/view/101
 
Source Revista de Análisis Económico - Economic Analysis Review; Vol 15, No 2 (2000); 3-32
Revista de Análisis Económico – Economic Analysis Review; Vol 15, No 2 (2000); 3-32
0718-8870
0716-5927
 
Language eng
 
Relation http://www.rae-ear.org/index.php/rae/article/view/101/194