 Hierarchical information and the rate of information diffusionYi Xue () and Ramazan Gencay Journal of Economic Dynamics and Control, 2012, vol. 36, issue 9, 1372-1401 Abstract: The rate of information diffusion and, consequently, price discovery are conditional not only upon the design of the market microstructure but also the informational structure. This paper presents a market microstructure model showing that an increasing number of information hierarchies among informed competitive traders leads to a slower information diffusion rate and informational inefficiency. The model illustrates that informed traders may prefer trading with each other rather than with noise traders in the presence of information hierarchies. The empirical investigation using transaction data on China's equity market supports that the information hierarchies decrease the speed of price discovery. Keywords: Information hierarchies; Information diffusion rate; Price discovery; Momentum (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:36:y:2012:i:9:p:1372-1401 DOI: 10.1016/j.jedc.2012.03.001 Access Statistics for this article Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok More articles in Journal of Economic Dynamics and Control from Elsevier |
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