Paper #1482

Título:

Information spillovers in asset markets with correlated values

Autores:

Vladimir Asriyan, William Fuchs y Brett Green

Fecha:

Abril 2015

Resumen:

We study information spillovers in a dynamic setting with privately informed traders and correlated asset values. A trade of one asset (or lack thereof) can provide information about the value of other assets. The information content of trading behavior is endogenously determined in equilibrium. We show that this endogeneity leads to multiple equilibria when the correlation between asset values is sufficiently high. The equilibria are ranked in terms of both trade volume and efficiency. We study the implications for policies that target market transparency as well as the market's ability to aggregate information. Total welfare is higher in any equilibrium of a fully transparent market than in a fully opaque one. However, both welfare and trading activity can decrease in the degree of market transparency. If traders have asymmetric access to transaction data, transparency levels the playing field, reduces the rents of more informed traders, but may also reduce total welfare. Moreover, even in a fully transparent market, information is not necessarily aggregated as the number of informed traders becomes arbitrarily large.

Palabras clave:

asymmetric information, information spillovers, market transparency, liquidity.

Códigos JEL:

G12, G14

Área de investigación:

Macroeconomía y Economía Internacional

Publicado en:

Forthcoming in American Economic Review

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