Informational Black Holes in Financial Markets

• 成果类型: Article
• 署名作者: Axelson, Ulf; Makarov, Igor
• 署名单位: University of London; London School Economics & Political Science
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13270
• 发表日期: 2023
• 页码: 3099-3140
• 关键词: Auctions; aggregation

摘要

We show that information aggregation in primary financial markets fails precisely when investors hold socially useful information for screening projects. Being wary of the Winner's Curse, less optimistic investors refrain from making financing offers, since their offers would be accepted only when a project is unviable. Their information is therefore lost. The Winner's Curse and associated information loss grow with the number of informed market participants, so that larger markets can lead to worse financing decisions and higher cost of capital for firms seeking financing. Precommitment to ration fundraising allocations, collusive club bidding, and shorting markets can mitigate the inefficiency.