Snowballing private information

• 成果类型: Article
• 署名作者: Sadzik, Tomasz; Woolnough, Chris
• 署名单位: University of California System; University of California Los Angeles
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2021.105333
• 发表日期: 2021
• 关键词: Market microstructure; Insider trading; Multi-dimensional information; excess volatility

摘要

We study informational efficiency in a model of strategic dynamic trade with a monopolistic informed trader. The informed trader continuously receives information about the growth rate of asset dividends and trades against market makers and liquidity traders. We show that when the private information is multidimensional, or growth rate of expected dividends is relatively high, private information snowballs over time and the informed trader reveals his information about the asset with delay. This contrasts with the informational efficiency of the workhorse model with one-dimensional information and no growth (see Chau and Vayanos (2008) and Caldentey and Stacchetti (2010)). We also show that the extent of the steadystate excess price volatility is linear in the market's variance about the value. (c) 2021 Published by Elsevier Inc.