IDEAS home Printed from https://ideas.repec.org/p/cem/doctra/190.html
   My bibliography  Save this paper

The Brokerage of Asymmetric Information

Author

Listed:
  • Rodolfo Apreda

Abstract

In this paper we oversee the logic of information sets, firstly handling information and markets in perfect environments and, secondly, dealing with information and markets in imperfect environments, in the context of bounded rationality. Further on, asymmetric information is addressed together with the role of opportunistic behaviour through hidden action, hidden information, the free-rider problem and signaling, expanding on financial accounting and asymmetric information. At last, asymmetric markets are expanded on, reviewing the buyers’ and sellers’ markets so as to handle the performance of intermediaries who stand ready to provide with immediacy and liquidity to buyers and sellers of financial assets. There are two contributions that this paper brings forward: firstly, an intuitive treatment of information sets in the context of mathematical Set Theory so as to make tractable some issues still neglected. Secondly, we claim and develop that a careful assessment of information sets makes headway towards an approach that regards market makers and other intermediaries as brokers of asymmetric information.

Suggested Citation

  • Rodolfo Apreda, 2001. "The Brokerage of Asymmetric Information," CEMA Working Papers: Serie Documentos de Trabajo. 190, Universidad del CEMA.
    • Handle: RePEc:cem:doctra:190
    as

    Download full text from publisher

    File URL: https://www.ucema.edu.ar/publicaciones/download/documentos/190.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Daniel F. Spulber, 1996. "Market Microstructure and Intermediation," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 135-152, Summer.
    2. Arrow, Kenneth J, 1974. "Limited Knowledge and Economic Analysis," American Economic Review, American Economic Association, vol. 64(1), pages 1-10, March.
    3. Rodolfo Apreda, 2000. "Differential Rates of Return and Residual Information Sets (A Discrete Approach)," CEMA Working Papers: Serie Documentos de Trabajo. 177, Universidad del CEMA.
    4. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    5. repec:bla:jfinan:v:43:y:1988:i:3:p:617-37 is not listed on IDEAS
    6. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    7. Allen, Franklin & Gorton, Gary, 1992. "Stock price manipulation, market microstructure and asymmetric information," European Economic Review, Elsevier, vol. 36(2-3), pages 624-630, April.
    8. Luigi Zingales, 1997. "Corporate Governance," NBER Working Papers 6309, National Bureau of Economic Research, Inc.
    9. Spulber,Daniel F., 1999. "Market Microstructure," Cambridge Books, Cambridge University Press, number 9780521650250, November.
    10. Douglass C. North, 1991. "Institutions," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 97-112, Winter.
    11. Rodolfo Apreda, 1998. "Dynamic Arbitrage Gaps for Financial Assets," CEMA Working Papers: Serie Documentos de Trabajo. 134, Universidad del CEMA.
    12. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    13. Garman, Mark B., 1976. "Market microstructure," Journal of Financial Economics, Elsevier, vol. 3(3), pages 257-275, June.
    14. Copeland, Thomas E & Galai, Dan, 1983. "Information Effects on the Bid-Ask Spread," Journal of Finance, American Finance Association, vol. 38(5), pages 1457-1469, December.
    15. Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, vol. 63(2), pages 134-139, May.
    16. Coase, R H, 1977. "The Wealth of Nations," Economic Inquiry, Western Economic Association International, vol. 15(3), pages 309-325, July.
    17. Apreda, Rodolfo, 1999. "Dynamic arbitrage gaps for financial assets: in a nonlinear and chaotic price adjustment process," Journal of Multinational Financial Management, Elsevier, vol. 9(3-4), pages 441-457, November.
    18. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    19. Grossman, S.J. & Miller, M.H., 1988. "Liquidity And Market Structure," Papers 88, Princeton, Department of Economics - Financial Research Center.
    20. Ho, Thomas & Stoll, Hans R., 1981. "Optimal dealer pricing under transactions and return uncertainty," Journal of Financial Economics, Elsevier, vol. 9(1), pages 47-73, March.
    21. Rodolfo Apreda, 2000. "A transaction costs approach to financial assets rates of return," CEMA Working Papers: Serie Documentos de Trabajo. 161, Universidad del CEMA.
    22. Michael Magill & Martine Quinzii, 2002. "Theory of Incomplete Markets, Volume 1," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262632543, December.
    23. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
    24. Harold Demsetz, 1968. "The Cost of Transacting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 82(1), pages 33-53.
    25. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    26. Scitovsky, Tibor, 1990. "The Benefits of Asymmetric Markets," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 135-148, Winter.
    27. Frederic S. Mishkin, 1999. "Global Financial Instability: Framework, Events, Issues," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 3-20, Fall.
    28. Daniel F. Spulber, 1996. "Market Making by Price-Setting Firms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(4), pages 559-580.
    29. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
    30. Mark S. Carey & Stephen D. Prowse & John Rea & Gregory F. Udell, 1993. "The economics of the private placement market," Staff Studies 166, Board of Governors of the Federal Reserve System (U.S.).
    31. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    32. William M. Dugger, 1996. "The Mechanisms of Governance," Journal of Economic Issues, Taylor & Francis Journals, vol. 30(4), pages 1212-1216, December.
    33. Mark D. Flood Ronald Huisman Kees G. Koedijk and Richard Lyons., 1998. "Search Costs: The Neglected Spread Component," Research Program in Finance Working Papers RPF-285, University of California at Berkeley.
    34. G. J. Stigler, 1972. "Perfect Competition, Historically Contemplated," Palgrave Macmillan Books, in: Charles K. Rowley (ed.), Readings in Industrial Economics, chapter 7, pages 105-130, Palgrave Macmillan.
    35. Herbert A. Simon, 1991. "Organizations and Markets," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 25-44, Spring.
    36. Edward Simpson Prescott, 1999. "A primer on moral-hazard models," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 47-78.
    37. Charles Wilson, 1980. "The Nature of Equilibrium in Markets with Adverse Selection," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 108-130, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. John Rosso Murillo, 2014. "Organizational structure for coal mine in Boyacá," Revista Facultad de Ciencias Económicas, Universidad Militar Nueva Granada, vol. 0(1), pages 169-187, June.
    2. Rodolfo Apreda, 2000. "Differential Rates of Return and Residual Information Sets (A Discrete Approach)," CEMA Working Papers: Serie Documentos de Trabajo. 177, Universidad del CEMA.
    3. Rodolfo Apreda, 2003. "On the Extent of Arbitrage Constraints within Transaction Algebras (A non-standard approach)," CEMA Working Papers: Serie Documentos de Trabajo. 239, Universidad del CEMA.
    4. Rodolfo Apreda, 2007. "The rise of corporate governance brokers and how they trade in asymmetric information," CEMA Working Papers: Serie Documentos de Trabajo. 341, Universidad del CEMA.
    5. Rodolfo Apreda, 2002. "Incremental cash flows, information sets and conflicts of interest," CEMA Working Papers: Serie Documentos de Trabajo. 220, Universidad del CEMA.
    6. Rodolfo Apreda, 2002. "How corporate governance and globalization can run afoul of the law and good practices in business: The Enron's disgraceful affair," CEMA Working Papers: Serie Documentos de Trabajo. 225, Universidad del CEMA.
    7. Rodolfo Apreda, 2005. "Public Governance. A Blueprint for Political Action and Better Government," CEMA Working Papers: Serie Documentos de Trabajo. 297, Universidad del CEMA.
    8. Rodolfo Apreda, 2004. "Differential rates, residual information sets and transactional algebras," CEMA Working Papers: Serie Documentos de Trabajo. 256, Universidad del CEMA.
    9. Rodolfo Apreda, 2008. "A new linkage between corporate and public governance through the lens of incremental cash flows," CEMA Working Papers: Serie Documentos de Trabajo. 374, Universidad del CEMA.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rodolfo Apreda, 2002. "Incremental cash flows, information sets and conflicts of interest," CEMA Working Papers: Serie Documentos de Trabajo. 220, Universidad del CEMA.
    2. Daniel Broxterman & Tingyu Zhou, 2023. "Information Frictions in Real Estate Markets: Recent Evidence and Issues," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 203-298, February.
    3. Committee, Nobel Prize, 2016. "Oliver Hart and Bengt Holmström: Contract Theory," Nobel Prize in Economics documents 2016-1, Nobel Prize Committee.
    4. Eduard Marinov, 2016. "The 2016 Nobel Prize in Economics," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 97-149.
    5. Wang, Sen & Bogle, Tim & van Kooten, G. Cornelis, 2012. "Forestry and the New Institutional Economics," Working Papers 130818, University of Victoria, Resource Economics and Policy.
    6. Gur Aminadav & Elias Papaioannou, 2020. "Corporate Control around the World," Journal of Finance, American Finance Association, vol. 75(3), pages 1191-1246, June.
    7. Rodolfo Apreda, 2002. "How corporate governance and globalization can run afoul of the law and good practices in business: The Enron's disgraceful affair," CEMA Working Papers: Serie Documentos de Trabajo. 225, Universidad del CEMA.
    8. Vayanos, Dimitri & Wang, Jiang, 2013. "Market Liquidity—Theory and Empirical Evidence ," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 1289-1361, Elsevier.
    9. Weiß, Christian, 2010. "The Ownership Concentration of Firms: Three Essays on the Determinants and Effects," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 30247.
    10. Steen Thomsen, 1999. "Corporate Ownership by Industrial Foundations," European Journal of Law and Economics, Springer, vol. 7(2), pages 117-137, March.
    11. Suvanto, Antti, 1992. "Pricing decisions and the position constraint in foreign exchange dealing," Research Discussion Papers 27/1992, Bank of Finland.
    12. Endo, Tadashi, 2020. "The primary dealer system in lower-income economies," Emerging Markets Review, Elsevier, vol. 45(C).
    13. Rodolfo Apreda, 2000. "Differential Rates of Return and Residual Information Sets (A Discrete Approach)," CEMA Working Papers: Serie Documentos de Trabajo. 177, Universidad del CEMA.
    14. Jagjeev Dosanjh, 2017. "Exchange Initiatives and Market Efficiency: Evidence from the Australian Securities Exchange," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2017, January-A.
    15. Suvanto, Antti, . "Foreign Exchange Dealing. Essays on the Microstructure of the Foreign Exchange Market," ETLA A, The Research Institute of the Finnish Economy, number 19, June.
    16. Ledenyov, Dimitri O. & Ledenyov, Viktor O., 2015. "Wave function method to forecast foreign currencies exchange rates at ultra high frequency electronic trading in foreign currencies exchange markets," MPRA Paper 67470, University Library of Munich, Germany.
    17. Foss, Nicolai J., 2003. "Bounded rationality in the economics of organization: "Much cited and little used"," Journal of Economic Psychology, Elsevier, vol. 24(2), pages 245-264, April.
    18. repec:uts:finphd:34 is not listed on IDEAS
    19. Joseph E. Stiglitz, 2004. "Information and the Change in the Paradigm in Economics, Part 2," The American Economist, Sage Publications, vol. 48(1), pages 17-49, March.
    20. repec:zbw:bofrdp:1992_027 is not listed on IDEAS
    21. Gehrig, Thomas & Jackson, Matthew, 1998. "Bid-ask spreads with indirect competition among specialists," Journal of Financial Markets, Elsevier, vol. 1(1), pages 89-119, April.
    22. Goergen, Marc & Manjon, Miguel C. & Renneboog, Luc, 2008. "Recent developments in German corporate governance," International Review of Law and Economics, Elsevier, vol. 28(3), pages 175-193, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cem:doctra:190. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Valeria Dowding (email available below). General contact details of provider: https://edirc.repec.org/data/cemaaar.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.