Information Aggregation in Dynamic Markets with Strategic Traders

21 Pages Posted: 31 Dec 2008 Last revised: 16 Mar 2010

See all articles by Michael Ostrovsky

Michael Ostrovsky

Stanford Graduate School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: March 11, 2009

Abstract

This paper studies information aggregation in dynamic markets with partially informed strategic traders. A natural condition on traded securities and information structure, "separability," is introduced. If a security is separable, information about its value always gets aggregated, for any prior distribution over the states of the world. If the security is non-separable, then there exists a prior such that information does not get aggregated. Special cases satisfying separability include Arrow-Debreu securities, whose value is equal to one in one state of the world and to zero in all others, and "additive" securities, whose value is equal to the sum of traders' signals.

Suggested Citation

Ostrovsky, Michael, Information Aggregation in Dynamic Markets with Strategic Traders (March 11, 2009). Rock Center for Corporate Governance Working Paper No. 28 . Available at SSRN: https://ssrn.com/abstract=1321555 or http://dx.doi.org/10.2139/ssrn.1321555

Michael Ostrovsky (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305
United States
650-724-7280 (Phone)

HOME PAGE: http://faculty-gsb.stanford.edu/ostrovsky/

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