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- Title
The Fragility of Price Informativeness.
- Authors
JUNGSUK HAN
- Abstract
This paper investigates the influence of uncertainty on information acquisition in financial markets with information asymmetries. Using a variation of the Kyle (1985) model, we analyze the interactions among shorthorizon informed traders, linking information acquisition to different levels of fundamental uncertainty. Expectations of future changes in information acquisition shape current trading incentives, impacting subsequent information acquisition. This feedback can lead to a self-fulfilling collapse of price informativeness. Our findings suggest that either too little or too much fundamental volatility may result in uninformative prices, creating market fragility.
- Subjects
PRICES; FINANCIAL markets; INFORMATION asymmetry
- Publication
Seoul Journal of Business, 2024, Vol 30, Issue 1, p93
- ISSN
1226-9816
- Publication type
Article
- DOI
10.35152/snusjb.2024.30.1.004