Imperfect Competition among Informed Traders
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- 1 October 2000
- journal article
- Published by Wiley in The Journal of Finance
- Vol. 55 (5) , 2117-2155
- https://doi.org/10.1111/0022-1082.00282
Abstract
We analyze competition among informed traders in the continuous‐time Kyle(1985) model, as Foster and Viswanathan (1996) do in discrete time. We explicitly describe the unique linear equilibrium when signals are imperfectly correlated and confirm the conjecture of Holden and Subrahmanyam (1992) that there is no linear equilibrium when signals are perfectly correlated. One result is that at some date, and at all dates thereafter, the market would have been more informationally efficient had there been a monopolist informed trader instead of competing traders. The relatively large amount of private information remaining near the end of trading causes the market to approach complete illiquidity.This publication has 9 references indexed in Scilit:
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