Making Money Out of Publicly Available Information
Oxford Financial Research Center Working Paper No. 2003-FE-07
14 Pages Posted: 28 Apr 2003
Date Written: February 2003
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.
Keywords: Market maker model, beliefs, information acquisition
JEL Classification: D82, G14
Suggested Citation: Suggested Citation