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Imperfect Competition among Informed Traders
Abstract
We analyze competition among informed traders in the continuous‐time Kyle(1985) model, as Foster and Viswanathan (1996) do in discrete time. We explicitly describe the unique linear equilibrium when signals are imperfectly correlated and confirm the conjecture of Holden and Subrahmanyam (1992) that there is no linear equilibrium when signals are perfectly correlated. One result is that at some date, and at all dates thereafter, the market would have been more informationally efficient had there been a monopolist informed trader instead of competing traders. The relatively large amount of private information remaining near the end of trading causes the market to approach complete illiquidity.
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Citations
Cited by
Lasry, J.-M., & Lions, P.-L. (2007) · Japanese Journal of Mathematics · doi:10.1007/s11537-007-0657-8 · Cited by 2,635
The impact of institutional ownership on corporate operating performance
Cornett, M. M., Marcus, A. J., Saunders, A., & Tehranian, H. (2007) · Journal of Banking & Finance · doi:10.1016/j.jbankfin.2006.08.006 · Cited by 760
Greener Pastures and the Impact of Dynamic Institutional Preferences
Bennett, J. A., Sias, R. W., & Starks, L. T. (2003) · Review of Financial Studies · doi:10.1093/rfs/hhg040 · Cited by 668
Asset Pricing under Asymmetric Information: Bubbles, Crashes, Technical Analysis, and Herding
Brunnermeier, M. K. (2001) · doi:10.1093/0198296983.001.0001 · Cited by 406
Do Portfolio Distortions Reflect Superior Information or Psychological Biases?
Korniotis, G. M., & Kumar, A. (2013) · Journal of Financial and Quantitative Analysis · doi:10.1017/s0022109012000610 · Cited by 166
Metadata
- Authors
- Back, K., Cao, C. H., & Willard, G. A.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 2000-10
- Volume
- 55
- Issue
- 5
- Pages
- 2117-2155
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2141826222
- Cited by
- 328
- References
- 0
- FWCI
- 19.32
- Type
- journal article
- Language
- en
- Open access
- closed
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- Back, K., Cao, C. H., & Willard, G. A. (2000). Imperfect Competition among Informed Traders. The Journal of Finance. https://doi.org/10.1111/0022-1082.00282
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