Information Investor Behavior Equilibrium Allocation And Surplus
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Author | : Li-Wei Chen |
Publisher | : |
Total Pages | : 63 |
Release | : 2006 |
Genre | : |
ISBN | : |
Interest in the efficiency of markets has led to much empirical testing. An enormous amount of work has been done in the field of finance investigating the efficiency of various financial markets. Downstair market (such as NYSE and TSE) rely on market makers, floor traders, and limit order to provide liquidity on demand. Yet despite the importance of informed trader as a source of liquidity, relatively little is know about how prices in downstairs market are determined under uncertainty and the effects of information leakage facilitated by transaction in the stock market.This article develops a model of the stock market where quantity demanded and prices are determined endogenously to increase our understanding of how information is leaked out. We find that information leakage is related to the precision and value observed of that information.This study finds that privately informed traders able to outperform the market even strong efficient one. This finding tends to refute the strong form of the efficient market hypothesis.Investors are rational ones pursuing their maximum utility. In an economy under certainty, investors can acquire and utilize any information including private and public ones, to estimate the risk, predict the true value of securities, carry on the investment, and thus influence the security price.Once the signal observed and its accuracy were improved, the investors adopt more active trading behavior, thus the quantity demanded for risky assets rise, and lead to the security price increase, as for and investor's utility. Second, we find that both risk adverse coefficient and the liquidity of security market are irrelevant to security price.Perfect information disclosure are not necessarily the key successful factors of the development of security market. The more independent information that investors have, not necessarily result more informative of price.
Author | : Bengt Holmstrom |
Publisher | : MIT Press |
Total Pages | : 263 |
Release | : 2013-01-11 |
Genre | : Business & Economics |
ISBN | : 0262518538 |
Two leading economists develop a theory explaining the demand for and supply of liquid assets. Why do financial institutions, industrial companies, and households hold low-yielding money balances, Treasury bills, and other liquid assets? When and to what extent can the state and international financial markets make up for a shortage of liquid assets, allowing agents to save and share risk more effectively? These questions are at the center of all financial crises, including the current global one. In Inside and Outside Liquidity, leading economists Bengt Holmström and Jean Tirole offer an original, unified perspective on these questions. In a slight, but important, departure from the standard theory of finance, they show how imperfect pledgeability of corporate income leads to a demand for as well as a shortage of liquidity with interesting implications for the pricing of assets, investment decisions, and liquidity management. The government has an active role to play in improving risk-sharing between consumers with limited commitment power and firms dealing with the high costs of potential liquidity shortages. In this perspective, private risk-sharing is always imperfect and may lead to financial crises that can be alleviated through government interventions.
Author | : Xavier Vives |
Publisher | : Princeton University Press |
Total Pages | : 422 |
Release | : 2010-01-25 |
Genre | : Business & Economics |
ISBN | : 140082950X |
The ways financial analysts, traders, and other specialists use information and learn from each other are of fundamental importance to understanding how markets work and prices are set. This graduate-level textbook analyzes how markets aggregate information and examines the impacts of specific market arrangements--or microstructure--on the aggregation process and overall performance of financial markets. Xavier Vives bridges the gap between the two primary views of markets--informational efficiency and herding--and uses a coherent game-theoretic framework to bring together the latest results from the rational expectations and herding literatures. Vives emphasizes the consequences of market interaction and social learning for informational and economic efficiency. He looks closely at information aggregation mechanisms, progressing from simple to complex environments: from static to dynamic models; from competitive to strategic agents; and from simple market strategies such as noncontingent orders or quantities to complex ones like price contingent orders or demand schedules. Vives finds that contending theories like informational efficiency and herding build on the same principles of Bayesian decision making and that "irrational" agents are not needed to explain herding behavior, booms, and crashes. As this book shows, the microstructure of a market is the crucial factor in the informational efficiency of prices. Provides the most complete analysis of the ways markets aggregate information Bridges the gap between the rational expectations and herding literatures Includes exercises with solutions Serves both as a graduate textbook and a resource for researchers, including financial analysts
Author | : Mr.Giovanni Dell'Ariccia |
Publisher | : International Monetary Fund |
Total Pages | : 32 |
Release | : 1998-06-01 |
Genre | : Business & Economics |
ISBN | : 145195154X |
The paper analyzes the effects of informational asymmetries on the market structure of the banking industry in a multi-period model of spatial competition. All lenders face uncertainty with regard to borrowers’ creditworthiness, but, in the process of lending, incumbent banks gather proprietary information about their clients, acquiring an advantage over potential entrants. These informational asymmetries are an important determinant of the industry structure and may represent a barrier to entry for new banks. The paper shows that, in contrast with traditional models of horizontal differentiation, the steady-state equilibrium is characterized by a finite number of banks even in the absence of fixed costs.
Author | : Zhang Yishan |
Publisher | : Routledge |
Total Pages | : 329 |
Release | : 2021-03-30 |
Genre | : Business & Economics |
ISBN | : 100029031X |
puts forward a new economic research framework, power paradigm, which reveals the essence of economic activities. helps establish a valid connection between macroeconomics and microeconomic and shed light on realistic economic issues. analyses unrecognised factors in economic activities, including interpersonal behavioural relationship and power structure, and their relations to market mechanism.
Author | : |
Publisher | : |
Total Pages | : 83 |
Release | : 2007 |
Genre | : Corporations |
ISBN | : 9781846632563 |
Dividend policy continues to be among the premier unsolved puzzles in finance. A number of theories have been advanced to explain dividend policy. This e-book briefly reviews the principal theories of payout policy and dividend policy and summarizes the empirical evidence on these theories. Empirical evidence is equivocal and the search for new explanation for dividends continues.
Author | : Mr.Anton Korinek |
Publisher | : International Monetary Fund |
Total Pages | : 42 |
Release | : 2013-12-17 |
Genre | : Business & Economics |
ISBN | : 148430795X |
Financial regulation is often framed as a question of economic efficiency. This paper, by contrast, puts the distributive implications of financial regulation center stage. We develop a model in which the financial sector benefits from risk-taking by earning greater expected returns. However, risktaking also increases the incidence of large losses that lead to credit crunches and impose negative externalities on the real economy. We describe a Pareto frontier along which different levels of risktaking map into different levels of welfare for the two parties. A regulator has to trade off efficiency in the financial sector, which is aided by deregulation, against efficiency in the real economy, which is aided by tighter regulation and a more stable supply of credit. We also show that financial innovation, asymmetric compensation schemes, concentration in the banking system, and bailout expectations enable or encourage greater risk-taking and allocate greater surplus to the financial sector at the expense of the rest of the economy.
Author | : |
Publisher | : |
Total Pages | : 782 |
Release | : 1994 |
Genre | : Decision-making |
ISBN | : |
Author | : Josef Haunschmied |
Publisher | : Springer |
Total Pages | : 321 |
Release | : 2014-07-08 |
Genre | : Mathematics |
ISBN | : 3642542484 |
Dynamic game theory serves the purpose of including strategic interaction in decision making and is therefore often applied to economic problems. This book presents the state-of-the-art and directions for future research in dynamic game theory related to economics. It was initiated by contributors to the 12th Viennese Workshop on Optimal Control, Dynamic Games and Nonlinear Dynamics and combines a selection of papers from the workshop with invited papers of high quality.
Author | : Matthew Bishop |
Publisher | : Bloomberg Press |
Total Pages | : 282 |
Release | : 2004-05-01 |
Genre | : Business & Economics |
ISBN | : 9781861975805 |