Asymmetric information and survival in financial markets

Emanuela Sciubba

Economic Theory, 2005, vol. 25, issue 2, 353-379

Abstract: In the evolutionary setting for a financial market developed by Blume and Easley (1992), we consider an infinitely repeated version of a model á la Grossman and Stiglitz (1980) with asymmetrically informed traders. Informed traders observe the realisation of a payoff relevant signal before making their portfolio decisions. Uninformed traders do not have direct access to this kind of information, but can partially infer it from market prices. As a counterpart for their privileged information, informed traders pay a per period cost. As a result, information acquisition triggers a trade-off in our setting. We prove that, so long as information is costly, uninformed traders survive. Copyright Springer-Verlag Berlin/Heidelberg 2005

Keywords: Asymmetric information; Evolution; Portfolio rules. (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (20)

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Working Paper: Asymmetric Information and Survival in Financial Markets (1999)
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DOI: 10.1007/s00199-003-0434-8

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