Who Acquires Information in Dealer Markets?
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Who Acquires Information in Dealer Markets? / Rudiger, Jesper; Vigier, Adrien.
2017.Research output: Working paper › Research
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TY - UNPB
T1 - Who Acquires Information in Dealer Markets?
AU - Rudiger, Jesper
AU - Vigier, Adrien
PY - 2017
Y1 - 2017
N2 - We study information acquisition in dealer markets. We first identify a one-sided strategic complementarity in information acquisition: the more informed traders are, the larger market makers' gain from becoming informed. We then fully characterize the unique equilibrium as a function of the (uniform) cost of information, and the composition of the market in terms of liquidity traders and speculators. Lastly, we examine the implications of our analysis for market liquidity and price discovery. Our findings shed light on several empirical regularities.
AB - We study information acquisition in dealer markets. We first identify a one-sided strategic complementarity in information acquisition: the more informed traders are, the larger market makers' gain from becoming informed. We then fully characterize the unique equilibrium as a function of the (uniform) cost of information, and the composition of the market in terms of liquidity traders and speculators. Lastly, we examine the implications of our analysis for market liquidity and price discovery. Our findings shed light on several empirical regularities.
KW - Faculty of Social Sciences
KW - Market Microstructure
KW - Informed Market Makers
KW - Dealer Markets
KW - Information Acquisition
KW - D82
KW - D83
KW - G12
KW - G14
KW - G20
M3 - Working paper
BT - Who Acquires Information in Dealer Markets?
ER -
ID: 184807985