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Making Money out of Publicly Available Information

Author

Listed:
  • Alan Morrison
  • Nir Vulkan

Abstract

It is received financial wisdom that when there is free entry by speculators, it is impossible to generate net profits on publicly available information. In this paper we study a version of the standard Kyle (85) model with endogenous information acquisition and we find that equilibria exist with free entry in which speculators make positive profits. Moreover, these equilibria are robust.

Suggested Citation

  • Alan Morrison & Nir Vulkan, 2003. "Making Money out of Publicly Available Information," Economics Series Working Papers 2003-FE-07, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:2003-fe-07
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    File URL: https://ora.ox.ac.uk/objects/uuid:c0d45b73-0f67-47ab-acbf-a8e1517ef6e2
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    References listed on IDEAS

    as
    1. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
    2. Albert S. Kyle, 1989. "Informed Speculation with Imperfect Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(3), pages 317-355.
    3. Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," The Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
    4. Verrecchia, Robert E, 1982. "Information Acquisition in a Noisy Rational Expectations Economy," Econometrica, Econometric Society, vol. 50(6), pages 1415-1430, November.
    5. Spiegel, Matthew & Subrahmanyam, Avanidhar, 1992. "Informed Speculation and Hedging in a Noncompetitive Securities Market," The Review of Financial Studies, Society for Financial Studies, vol. 5(2), pages 307-329.
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    Cited by:

    1. Diego García & Branko Urosevic, 2004. "Noise and aggregation of information in large markets," Economics Working Papers 785, Department of Economics and Business, Universitat Pompeu Fabra.

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    More about this item

    Keywords

    Market maker model; beliefs; information accquisition;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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