Giffen goods and market making
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- dc.contributor.author Cespa, Giovanni
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2020-05-25T09:26:49Z
- dc.date.available 2020-05-25T09:26:49Z
- dc.date.issued 2002-04-01
- dc.date.modified 2020-05-25T09:19:47Z
- dc.description.abstract This paper shows that information effects per se are not responsible for the Giffen goods anomaly affecting competitive traders demands in multi- asset, noisy rational expectations equilibrium models. The role that information plays in traders strategies also matters. In a market with risk averse, uninformed traders, informed agents have a dual motive for trading: speculation and market making. While speculation entails using prices to assess the effect of private signal error terms, market making requires employing them to disentangle noise traders effects in traders aggregate orders. In a correlated environment, this complicates a trader s signal-extraction problem and may generate upward-sloping demand curves. Assuming either (i) that competitive, risk neutral market makers price the assets, or that (ii) the risk tolerance coefficient of uninformed traders grows without bound, removes the market making component from informed traders demands, rendering them well behaved in prices.
- dc.format.mimetype application/pdf*
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=681
- dc.identifier.citation Economic Theory, 2005, vol. 25, 983-997
- dc.identifier.uri http://hdl.handle.net/10230/862
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 681
- 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 financial economics
- dc.subject.keyword asset pricing
- dc.subject.keyword information and market efficiency
- dc.subject.keyword Finance and Accounting
- dc.title Giffen goods and market making
- dc.type info:eu-repo/semantics/workingPaper