The time cost of information in financial markets

• 成果类型: Article
• 署名作者: Kendall, Chad
• 署名单位: University of Southern California
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2018.03.007
• 发表日期: 2018
• 页码: 118-157
• 关键词: information acquisition; financial markets; informational efficiency

摘要

I model a financial market in which traders acquire private information through time-consuming research. A time cost of information arises due to competition - through the expected adverse price movements due to others' trades - causing traders to rush to trade on weak information. This cost monotonically increases with asset value uncertainty, so that, exactly opposite to the result under the standard modeling assumption of a monetary cost of information, traders acquire the least information when this uncertainty is largest. The model makes several novel testable predictions regarding volume and order imbalances, some of which have existing empirical support. (C) 2018 Elsevier Inc. All rights reserved.