Statistical mechanics of asset markets with private information

DOI10.1080/713665667zbMATH Open1405.91709arXivcond-mat/0101351OpenAlexW3125884258WikidataQ61444467 ScholiaQ61444467MaRDI QIDQ4646476FDOQ4646476

Authors:

Publication date: 14 January 2019

Published in: Quantitative Finance (Search for Journal in Brave)

Abstract: Traders in a market typically have widely different, private information on the return of an asset. The equilibrium price of the asset may reflect this information more accurately if the number of traders is large enough compared to the number of the states of the world that determine the return of the asset. We study the transition from markets where prices do not reflect the information accurately into markets where it does. In competitive markets, this transition takes place suddenly, at a critical value of the ratio between number of states and number of traders. The Nash equilibrium market behaves quite differently from a competitive market even in the limit of large economies.

Full work available at URL: https://arxiv.org/abs/cond-mat/0101351

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zbMATH Keywords

private informationstatistical mechanicsasset markets

Mathematics Subject Classification ID

Applications of statistical and quantum mechanics to economics (econophysics) (91B80) Financial applications of other theories (91G80)

Cited In (13)

• Stationary states of a spherical minority game with ergodicity breaking
• Dynamics of adaptive agents with asymmetric information
• The role of information in a two-traders market
• Partial information, market efficiency, and anomalous continuous phase transition
• Information thermodynamics of financial markets: the Glosten–Milgrom model
• On the strategy frequency problem in batch minority games
• Title not available (Why is that?)
• Self-organization and the persistence of noise in financial markets
• Competitive rational expectations equilibria without apology
• Dissecting financial markets: sectors and states
• Market mechanism and expectations in minority and majority games
• A mathematical model for value estimation with public information and herding
• Effect of Tobin tax on trading decisions in an experimental minority game

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