Informed Trading, Investment, and Welfare.

This paper studies the welfare economics of informed trading in a stock market. We model the effect of more informative prices on investment, given that this dependence will itself be reflected in equilibrium prices. We show that in rational expectations equilibrium with price-taking competitive behaviour, and in the presence of risk-neutral uninformed agents, uninformed traders cannot lose money on average to informed traders.

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Year of publication:	1997
Authors:	Dow, J ; Rahi, R
Institutions:	Department of Economics, European University Institute
Subject:	FINANCIAL MARKET \| INFORMATION \| GOVERNMENT POLICY \| REGULATION \| WELFARE ECONOMICS

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Series:	Economics Working Papers.
Type of publication:	Book / Working Paper
Notes:	22 pages
Classification:	G14 - Information and Market Efficiency; Event Studies ; G18 - Government Policy and Regulation ; D82 - Asymmetric and Private Information ; D60 - Welfare Economics. General
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005816381