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Author: Li-Wei Chen Publisher: ISBN: Category : Languages : en Pages : 63
Book Description
Interest in the efficiency of markets has led to much empirical testing. An enormous amount of work has been done in the field of finance investigating the efficiency of various financial markets. Downstair market (such as NYSE and TSE) rely on market makers, floor traders, and limit order to provide liquidity on demand. Yet despite the importance of informed trader as a source of liquidity, relatively little is know about how prices in downstairs market are determined under uncertainty and the effects of information leakage facilitated by transaction in the stock market.This article develops a model of the stock market where quantity demanded and prices are determined endogenously to increase our understanding of how information is leaked out. We find that information leakage is related to the precision and value observed of that information.This study finds that privately informed traders able to outperform the market even strong efficient one. This finding tends to refute the strong form of the efficient market hypothesis.Investors are rational ones pursuing their maximum utility. In an economy under certainty, investors can acquire and utilize any information including private and public ones, to estimate the risk, predict the true value of securities, carry on the investment, and thus influence the security price.Once the signal observed and its accuracy were improved, the investors adopt more active trading behavior, thus the quantity demanded for risky assets rise, and lead to the security price increase, as for and investor's utility. Second, we find that both risk adverse coefficient and the liquidity of security market are irrelevant to security price.Perfect information disclosure are not necessarily the key successful factors of the development of security market. The more independent information that investors have, not necessarily result more informative of price.
Author: Li-Wei Chen Publisher: ISBN: Category : Languages : en Pages : 63
Book Description
Interest in the efficiency of markets has led to much empirical testing. An enormous amount of work has been done in the field of finance investigating the efficiency of various financial markets. Downstair market (such as NYSE and TSE) rely on market makers, floor traders, and limit order to provide liquidity on demand. Yet despite the importance of informed trader as a source of liquidity, relatively little is know about how prices in downstairs market are determined under uncertainty and the effects of information leakage facilitated by transaction in the stock market.This article develops a model of the stock market where quantity demanded and prices are determined endogenously to increase our understanding of how information is leaked out. We find that information leakage is related to the precision and value observed of that information.This study finds that privately informed traders able to outperform the market even strong efficient one. This finding tends to refute the strong form of the efficient market hypothesis.Investors are rational ones pursuing their maximum utility. In an economy under certainty, investors can acquire and utilize any information including private and public ones, to estimate the risk, predict the true value of securities, carry on the investment, and thus influence the security price.Once the signal observed and its accuracy were improved, the investors adopt more active trading behavior, thus the quantity demanded for risky assets rise, and lead to the security price increase, as for and investor's utility. Second, we find that both risk adverse coefficient and the liquidity of security market are irrelevant to security price.Perfect information disclosure are not necessarily the key successful factors of the development of security market. The more independent information that investors have, not necessarily result more informative of price.
Author: Bengt Holmstrom Publisher: MIT Press ISBN: 0262518538 Category : Business & Economics Languages : en Pages : 263
Book Description
Two leading economists develop a theory explaining the demand for and supply of liquid assets. Why do financial institutions, industrial companies, and households hold low-yielding money balances, Treasury bills, and other liquid assets? When and to what extent can the state and international financial markets make up for a shortage of liquid assets, allowing agents to save and share risk more effectively? These questions are at the center of all financial crises, including the current global one. In Inside and Outside Liquidity, leading economists Bengt Holmström and Jean Tirole offer an original, unified perspective on these questions. In a slight, but important, departure from the standard theory of finance, they show how imperfect pledgeability of corporate income leads to a demand for as well as a shortage of liquidity with interesting implications for the pricing of assets, investment decisions, and liquidity management. The government has an active role to play in improving risk-sharing between consumers with limited commitment power and firms dealing with the high costs of potential liquidity shortages. In this perspective, private risk-sharing is always imperfect and may lead to financial crises that can be alleviated through government interventions.
Author: John Y. Campbell Publisher: OUP Oxford ISBN: 019160691X Category : Business & Economics Languages : en Pages : 272
Book Description
Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.
Author: Zhang Yishan Publisher: Routledge ISBN: 1000290379 Category : Business & Economics Languages : en Pages : 291
Book Description
Based on an investigation of economic and resource allocation factors and their close relation to economic power, this book puts forward the power paradigm, a new economic research paradigm revealing the relationship among power, institutions, and resource allocation mechanisms, helping to establish a valid connection between macroeconomics and microeconomics and shedding light on real-world economic issues. Drawing on classical, neoclassical, and institutional economics and how these schools of thought have impacted on economic development in China over the past century, the book sheds light on distribution processes and argues that enterprise contracts, market pricing, policies, laws and regulations can all be classified as interest distribution mechanisms informed by a variety of power games. The power paradigm suggests that to achieve full utility and an optimal allocation of resources to foster social welfare, power reciprocity needs to be shared among different economic agents at the same hierarchy level while making sure that power and responsibility are equivalent for each economic agent. The book will appeal to research students and academics interested in heterodox economics, pluralist approaches, institutional economics, and game theory.
Author: G. Constantinides Publisher: Elsevier ISBN: 9780444513632 Category : Business & Economics Languages : en Pages : 698
Book Description
Arbitrage, State Prices and Portfolio Theory / Philip h. Dybvig and Stephen a. Ross / - Intertemporal Asset Pricing Theory / Darrell Duffle / - Tests of Multifactor Pricing Models, Volatility Bounds and Portfolio Performance / Wayne E. Ferson / - Consumption-Based Asset Pricing / John y Campbell / - The Equity Premium in Retrospect / Rainish Mehra and Edward c. Prescott / - Anomalies and Market Efficiency / William Schwert / - Are Financial Assets Priced Locally or Globally? / G. Andrew Karolyi and Rene M. Stuli / - Microstructure and Asset Pricing / David Easley and Maureen O'hara / - A Survey of Behavioral Finance / Nicholas Barberis and Richard Thaler / - Derivatives / Robert E. Whaley / - Fixed-Income Pricing / Qiang Dai and Kenneth J. Singleton.
Author: R. Glenn Hubbard Publisher: University of Chicago Press ISBN: 0226355942 Category : Business & Economics Languages : en Pages : 354
Book Description
In this volume, specialists from traditionally separate areas in economics and finance investigate issues at the conjunction of their fields. They argue that financial decisions of the firm can affect real economic activity—and this is true for enough firms and consumers to have significant aggregate economic effects. They demonstrate that important differences—asymmetries—in access to information between "borrowers" and "lenders" ("insiders" and "outsiders") in financial transactions affect investment decisions of firms and the organization of financial markets. The original research emphasizes the role of information problems in explaining empirically important links between internal finance and investment, as well as their role in accounting for observed variations in mechanisms for corporate control.
Author: Josef Haunschmied Publisher: Springer ISBN: 3642542484 Category : Mathematics Languages : en Pages : 321
Book Description
Dynamic game theory serves the purpose of including strategic interaction in decision making and is therefore often applied to economic problems. This book presents the state-of-the-art and directions for future research in dynamic game theory related to economics. It was initiated by contributors to the 12th Viennese Workshop on Optimal Control, Dynamic Games and Nonlinear Dynamics and combines a selection of papers from the workshop with invited papers of high quality.
Author: Li-Wei Chen
Author: Li-Wei Chen
Author: Bengt Holmstrom
Author: John Y. Campbell
Author: Zhang Yishan
Author: 
Author: G. Constantinides
Author: Hersh Shefrin
Author: John H. Cochrane
Author: R. Glenn Hubbard
Author: Josef Haunschmied