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Making Money out of Publicly Available Information

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  • 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," OFRC Working Papers Series 2003fe07, Oxford Financial Research Centre.
    • Handle: RePEc:sbs:wpsefe:2003fe07
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    File URL: http://www.finance.ox.ac.uk/file_links/finecon_papers/2003fe07.pdf
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    References listed on IDEAS

    as
    1. Foster, F Douglas & Viswanathan, S, 1993. "The Effect of Public Information and Competition on Trading Volume and Price Volatility," The Review of Financial Studies, Society for Financial Studies, vol. 6(1), pages 23-56.
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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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