Testing Financial Market Equilibrium under Asymmetric Information
Bibliographic Data
| ID | 10172041 |
|---|---|
| Authors | Robert H Litzenberger, Vicente Madrigal |
| Year | 1992 |
| Volume | 100 |
| Issue | 2 |
| Pages | 317-348 |
| Publication date | 1992-04-01 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Political Economy (JOURNAL) |
| Journal identifiers | ISSN: 0022-3808 • E-ISSN: 1537-534X |
| Publisher | University of Chicago Press (PUBLISHER • US) |
| DOI | 10.1086/261820 |
| OpenAlex | W2029161560 |
| Language | EN |
| Citations received | 1 |
| References cited | 3 |
The authors devise tests that distinguish between competitive (Walrasian), fully revealing rational expectations and noisy rational expectations equilibria based on their predictions concerning trading volume around public information signals. Empirical results strongly support the noisy rational expectations hypothesis. This indicates that a significant amount of noise exists (so that private information has value), but not enough to obfuscate entirely the information content of price. The authors' analysis also indicates that the dispersion of private information across traders has an impact on trading volume, but not on price. Copyright 1992 by University of Chicago Press
Dispersion (optics · Econometrics · Economics · Financial economics · Financial market · Information asymmetry · Microeconomics · Noise (video · Private information retrieval · Public information · Rational expectations · Statistics · Value (mathematics · Volume (thermodynamics · Complex Systems and Time Series Analysis · Computer Science · Finance · Financial Markets and Investment Strategies · Market Dynamics and Volatility · Mathematics
| Citations per year | 0.03 |
|---|---|
| Citation span | 1997 - 1997 (1) |
| Highly cited | No |