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Financial Market Model With Influential Informed Investors

Author

Listed:
  • AXEL GRORUD

    (U.M.R. CNRS 6632, C.M.I., Université de Provence, 39 rue Joliot-Curie, 13453 Marseille cedex 13, France)

  • MONIQUE PONTIER

    (U.M.R. CNRS C 5583, Laboratoire de statistique et probabilités, Université Paul Sabatier, 118 route de Narbonne, 31 062 Toulouse cedex 04, France)

Abstract

We develop a financial model with an "influential informed" investor who has an additional information and influences asset prices by means of his strategy. The prices dynamics are supposed to be driven by a Brownian motion, the informed investor's strategies affect the risky asset trends and the interest rate. Our paper could be seen as an extension of Cuoco and Cvitanic's work [4] since, as these authors, we solve the informed influential investor's optimization problem. But our main result is the construction of statistical tests to detect if, observing asset prices and agent's strategies, this influential agent is or not an informed trader.

Suggested Citation

  • Axel Grorud & Monique Pontier, 2005. "Financial Market Model With Influential Informed Investors," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 8(06), pages 693-716.
    • Handle: RePEc:wsi:ijtafx:v:08:y:2005:i:06:n:s0219024905003219
    DOI: 10.1142/S0219024905003219
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    Citations

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    Cited by:

    1. José Manuel Corcuera & Giulia Nunno & José Fajardo, 2019. "Kyle equilibrium under random price pressure," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 42(1), pages 77-101, June.
    2. Ackert, Lucy F. & Jiang, Lei & Lee, Hoan Soo & Liu, Jie, 2016. "Influential investors in online stock forums," International Review of Financial Analysis, Elsevier, vol. 45(C), pages 39-46.
    3. José Manuel Corcuera & Giulia Di Nunno, 2018. "Kyle–Back’S Model With A Random Horizon," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 21(02), pages 1-41, March.

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