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The dynamics of strategic information flows in stock markets

Seiler, P.; Taub, B.

Authors

P. Seiler

B. Taub



Abstract

We model a stock market with multiple stocks in a dynamic setting. Multiple informed traders receive new and heterogeneous information about the stocks in each period and use this information strategically. We characterize the decay rate of the information as it is incorporated into prices. The presence of multiple assets speeds information release by providing more channels for market makers to acquire information and incorporate that information in prices. The result is not only that profits are reduced in multi-asset settings, but that information release tilts toward new information relative to old information, reducing the profits that can be acquired by privately informed traders.

Citation

Seiler, P., & Taub, B. (2008). The dynamics of strategic information flows in stock markets. Finance and Stochastics, 12(1), 43-82. https://doi.org/10.1007/s00780-007-0046-4

Journal Article Type Article
Publication Date Jan 1, 2008
Deposit Date Jul 20, 2011
Journal Finance and stochastics.
Print ISSN 0949-2984
Electronic ISSN 1432-1122
Publisher Springer
Peer Reviewed Peer Reviewed
Volume 12
Issue 1
Pages 43-82
DOI https://doi.org/10.1007/s00780-007-0046-4
Keywords Multi-asset pricing, Strategic information, Information dynamics, Frequency-domain methods.
Public URL https://durham-repository.worktribe.com/output/1529627

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