Related papers: On information efficiency and financial stability
A principal who values an object allocates it to one or more agents. Agents learn private information (signals) from an information designer about the allocation payoff to the principal. Monetary transfer is not available but the principal…
Is transparency always beneficial in complex systems such as traffic networks and stock markets? How is transparency defined in multi-agent systems, and what is its optimal degree at which social welfare is highest? We take an agent-based…
The aim of this paper is to propose a heterogeneous agent model of stock markets that develop complicated endogenous price fluctuations. We find occurrences of non-stationary chaos, or speculative bubble, are caused by the heterogeneity of…
We study information elicitation in cost-function-based combinatorial prediction markets when the market maker's utility for information decreases over time. In the sudden revelation setting, it is known that some piece of information will…
The efficient market hypothesis (EMH) famously stated that prices fully reflect the information available to traders. This critically depends on the transfer of information into prices through trading strategies. Traders optimise their…
A new simple model of financial market is proposed, based on the sequential and inter-temporal nature of trader-trader interaction, and on a new simple trading strategy space. In this pattern-based speculation model, the traders open and…
Two agents trade an item in a simultaneous offer setting, where the exchange takes place if and only if the buyer's bid price weakly exceeds the seller's ask price. Each agent is randomly assigned the buyer or seller role. Both agents are…
A general information equilibrium model in the case of ideal information transfer is defined and then used to derive the relationship between supply (information destination) and demand (information source) with the price as the detector of…
We describe a simple model for speculative trading based on adaptive behavior of economic agents.The adaptive behavior is expressed through a feedback mechanism for changing agents' stock-to-bond ratios, depending on the past performance of…
We investigate asymmetry of information in the context of robust approach to pricing and hedging of financial derivatives. We consider two agents, one who only observes the stock prices and another with some additional information, and…
Does the asymptotic variance of the maximum composite likelihood estimator of a parameter of interest always decrease when the nuisance parameters are known? Will a composite likelihood necessarily become more efficient by incorporating…
We investigated financial market data to determine which factors affect information flow between stocks. Two factors, the time dependency and the degree of efficiency, were considered in the analysis of Korean, the Japanese, the Taiwanese,…
We show that under mild assumptions, the total value of information to informed traders in the market can be measured by the covariance between price changes and order flow. This covariance captures noise trader losses, which equal informed…
We study a multi-agent setting in which brokers transact with an informed trader. Through a sequential Stackelberg-type game, brokers manage trading costs and adverse selection with an informed trader. In particular, supplying liquidity to…
Post Modigliani and Miller (1958), the concept of usage of arbitrage created a permanent mark on the discourses of financial framework. The arbitrage process is largely based on information dissemination amongst the stakeholders operating…
An agent makes decisions based on multiple sources of information. In isolation, each source is well understood, but their correlation is unknown. We study the agent's robustly optimal strategies -- those that give the best possible…
A core tenet underpinning the conception of contemporary information networks, such as social media platforms, is that users should not be constrained in the amount of information they can freely and willingly exchange with one another…
This paper delves into financial markets that incorporate a novel form of heterogeneity among investors, specifically in terms of their beliefs regarding the reliability of signals in the business cycle economy model, which may be biased.…
We introduce a mathematical theory called market connectivity that gives concrete ways to both measure the efficiency of markets and find inefficiencies in large markets. The theory leads to new methods for testing the famous efficient…
We study partial information Nash equilibrium between a broker and an informed trader. In this setting, the informed trader, who possesses knowledge of a trading signal, trades multiple assets with the broker in a dealer market.…