Is Kyle's equilibrium model stable?

Umut Cetin and Kasper Larsen

Papers from arXiv.org

Abstract: In the dynamic discrete-time trading setting of Kyle (1985), we prove that Kyle's equilibrium model is stable when there are one or two trading times. For three or more trading times, we prove that Kyle's equilibrium is not stable. These theoretical results are proven to hold irrespectively of all Kyle's input parameters.

Date: 2023-07, Revised 2023-07
New Economics Papers: this item is included in nep-mst
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