Rational destabilization in a frictionless market

DOI10.1016/J.JET.2020.105169MaRDI QIDQ1995315zbMATH OpenOpenAlexFDO

Authors Tomasz Sadzik, Chris Woolnough

Publication date 23 February 2021

Published in Journal of Economic Theory (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.jet.2020.105169

zbMATH Keywords

asymmetric informationmarket microstructurearbitragemultidimensional signalsfront-running

Mathematics Subject Classification ID

Financial markets (91G15)

Recommendations

• Informed manipulation.
• Strategic trading in informationally complex environments
• Robust pricing under strategic trading
• Partially informed noise traders
• Smooth trading with overconfidence and market power

Cites work

• A Model of Intertemporal Asset Prices Under Asymmetric Information
• A robust model of bubbles with multidimensional uncertainty
• Aggregation of Information in Large Cournot Markets
• Bubbles and Crashes
• Continuous Auctions and Insider Trading
• Front-running dynamics
• Information aggregation in dynamic markets with strategic traders
• Informed manipulation.
• Insider Trading without Normality
• Price Manipulation and Quasi-Arbitrage
• Public and private learning from prices, strategic substitutability and complementarity, and equilibrium multiplicity
• Smart Money, Noise Trading and Stock Price Behaviour
• Speculative Investor Behavior in a Stock Market with Heterogeneous Expectations
• Strategic trading in informationally complex environments
• The high-frequency trading arms race: frequent batch auctions as a market design response
• The more we know about the fundamental, the less we agree on the price
• What is the optimal trading frequency in financial markets?

Cited in

(12)

• Activism, strategic trading, and liquidity
• Liquidity drops
• Dampening effect and market efficiency
• Price manipulation, dynamic informed trading, and the uniqueness of equilibrium in sequential trading
• Manipulation and the Allocational Role of Prices
• Dynamic signaling and market breakdown
• More hedging instruments may destabilize markets
• Can public information promote market stability?
• Price distortions under coarse reasoning with frequent trade
• Snowballing private information
• A dynamic strategy of the informed trader with market manipulation
• Private Information and High-Frequency Stochastic Volatility

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