A model of market‐making with imperfect information
作者:
I. R. C. Hirst,
期刊:
Managerial and Decision Economics
(WILEY Available online 1980)
卷期:
Volume 1,
issue 1
页码: 12-18
ISSN:0143-6570
年代: 1980
DOI:10.1002/mde.4090010104
出版商: John Wiley&Sons, Ltd.
数据来源: WILEY
摘要:
AbstractAlthough the prevention of false markets is one of the major concerns of stock market authorities in the UK and elsewhere, until recently, the theoretical literature on the workings of markets with imperfect information has been sparse. This paper analyses the problem of providing liquidity to investors when price‐sensitive information is unequally distributed.Specifically we shall model the activities of a market‐maker when certain traders have price‐sensitive information unavailable to other market participants. Our model will show how the bid‐asked spread would be determined in such a market. It is useful in explaining certain tactics employed by stock market traders and in suggesting alternative ways of evaluating market efficiency.The theory is developed in three sections: (1) the determination of the bid‐asked spread for a single, isolated transaction; (2) the determination of the bid‐asked spread in a continuous market; (3) the relationship between the spread and the size of
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