Information, market power and welfare

• 成果类型: Article
• 署名作者: Lou, Youcheng; Rahi, Rohit
• 署名单位: Chinese Academy of Sciences; Academy of Mathematics & System Sciences, CAS; University of London; London School Economics & Political Science
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2023.105756
• 发表日期: 2023
• 关键词: Double auction; Heterogeneous values; Price informativeness; liquidity; Passive investing; ESG investing

摘要

We study the market for a risky asset in which traders are heterogeneous both in terms of their value for the asset and the information that they have about this value. Traders behave strategically and use the equilibrium price to extract information that is relevant to them. Due to adverse selection, uninformed traders are less willing than the informed to provide liquidity. We evaluate the impact of a change in the size or composition of the investor population on price informativeness, liquidity and welfare, with applications to the rise of passive investing and the adoption of ESG standards. (c) 2023 The Author(s). Published by Elsevier Inc. This is an open access article under the CC BY license (http://creativecommons .org /licenses /by /4 .0/). JEL classification: D82; G14