Strategic behavior and price discovery
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- dc.contributor.author Medrano, Luis A.ca
- dc.contributor.author Vives, Xavierca
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2018-02-14T15:30:10Z
- dc.date.available 2018-02-14T15:30:10Z
- dc.date.issued 1997-09-01
- dc.date.modified 2017-07-23T02:03:14Z
- dc.description.abstract The paper analyzes the effects of strategic behavior by an insider in a price discovery process, akin to an information tatonnement, in the presence of a competitive informed sector. Such processes are used in the preopening period of continuous trading systems in several exchanges. It is found that the insider manipulates the market using a contrarian strategy in order to neutralize the effect of the trades of competitive informed agents. Furthermore, consistently with the empirical evidence available, we find that information revelation accelerates close to the opening, that the market price does not converge to the fundamental value no matter how many rounds the tatonnement has, and that the expected trading volume displays a U-shaped pattern. We also find that a market with a larger competitive sector (smaller insider) has an improved informational efficiency and an increased trading volume. The insider provides a public good (a lower informativeness of the price) for the competitive informed sector.
- dc.format.mimetype application/pdfca
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=238
- dc.identifier.citation Rand Journal of Economics, 32, 221-248, 2001
- dc.identifier.uri http://hdl.handle.net/10230/580
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 238
- dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
- dc.subject.keyword market manipulation
- dc.subject.keyword contrarian behavior
- dc.subject.keyword preopening auction
- dc.subject.keyword information atonnement
- dc.subject.keyword market microestructure
- dc.subject.keyword insider trading
- dc.subject.keyword Finance and Accounting
- dc.title Strategic behavior and price discoveryca
- dc.type info:eu-repo/semantics/workingPaper