Making Money out of Publicly Available Information
Alan D. Morrison
University of Oxford - Said Business School; University of Oxford - Merton College
University of Oxford - Said Business School
Oxford Financial Research Center Working Paper No. 2003-FE-07
It is received financial wisdom that when there is free entry by speculators, it is impossible to generate net profits on publicly available information. In this paper we study a version of the standard Kyle (85) model with endogenous information acquisition and we find that equilibria exist with free entry in which speculators make positive profits. Moreover, these equilibria are robust.
Number of Pages in PDF File: 14
Keywords: Market maker model, beliefs, information acquisition
JEL Classification: D82, G14working papers series
Date posted: April 28, 2003
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