Related papers: On information efficiency and financial stability
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
In many non-cooperative settings, agents often possess useful information that provide an advantage over their opponent(s), but acting on such information too frequently can lead to detection. I develop a simple framework to analyze such a…
The hidden-action model captures a fundamental problem of principal-agent theory and provides an optimal sharing rule when only the outcome but not the effort can be observed. However, the hidden-action model builds on various explicit and…
We have studied here the self-organising features of the dynamics of a model market, where the agents `trade' for a single commodity with their money. The model market consists of fixed numbers of economic agents, money supply and…
This study evaluates the scale-dependent informational efficiency of stock markets using the Financial Chaos Index, a tensor-eigenvalue-based measure of realized volatility. Incorporating Granger causality and network-theoretic analysis…
We present a financial market model, characterized by self-organized criticality, that is able to generate endogenously a realistic price dynamics and to reproduce well-known stylized facts. We consider a community of heterogeneous traders,…
An agent-based model for firms' dynamics is developed. The model consists of firm agents with identical characteristic parameters and a bank agent. Dynamics of those agents is described by their balance sheets. Each firm tries to maximize…
The minority model was introduced to study the competition between agents with limited information. It has the remarkable feature that, as the amount of information available increases, the collective gain made by the agents is reduced.…
We study a dynamical Ising model of agents' opinions (buy or sell) with coupling coefficients reassessed continuously in time according to how past external news (magnetic field) have explained realized market returns. By combining herding,…
Building on topological data analysis and expert knowledge, this study introduces a Mapper-based approach to cluster agents based on their tendency to be influenced by information spread. The context of our paper is financial markets with…
We study a competitive electricity market equilibrium with two trading stages, day-ahead and real-time. The welfare of each market agent is exposed to uncertainty (here from renewable energy production), while agent information on the…
A stochastic model with a continuum of economic agents often involves shocks at both macro and micro levels. This can be formalized by a continuum of random variables that are conditionally independent given the macro level shocks. Based on…
The Glosten-Milgrom model describes a single asset market, where informed traders interact with a market maker, in the presence of noise traders. We derive an analogy between this financial model and a Szil\'ard information engine by {\em…
Modern mainstream financial theory is underpinned by the efficient market hypothesis, which posits the rapid incorporation of relevant information into asset pricing. Limited prior studies in the operational research literature have…
We study the effect of providing information to agents who queue before a scarce good is distributed at a fixed time. Many information policies reveal "sudden bad news," when agents learn the queue is longer than previously believed. Sudden…
By investigating nonfungible tokens (NFTs), we provide the first systematic study of retail investor behavior through asset bubbles. Given that NFTs are recorded in public blockchains, we are able to track investor behavior over time,…
We study information aggregation in a dynamic trading model with partially informed traders. Ostrovsky [2012] showed that `separable' securities aggregate information in all equilibria, however, determining whether a security is separable…
We introduce a stochastic price model where, together with a random component, a moving average of logarithmic prices contributes to the price formation. Our model is tested against financial datasets, showing an extremely good agreement…
This paper studies the equilibrium pricing of asset shares in the presence of dynamic private information. The market consists of a risk-neutral informed agent who observes the firm value, noise traders, and competitive market makers who…
We construct a model of an exchange economy in which agents trade assets contingent on an observable signal, the probability of which depends on public opinion. The agents in our model are replaced occasionally and each person updates…