Can public information promote market stability?

  • Binbin Chen*
  • , Shancun Liu
  • , Qiang Zhang
  • *Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We study the effect of public information revealing part of underlying fundamentals on market stability. It shows that accurate public information reduces the uncertainty faced by informed traders and increases their responsiveness to private information and expected volume. The reverse trading and multiple equilibria arise under lower public information precision and they disappear when public information precision increases sufficiently.

Original languageEnglish
Pages (from-to)103-106
Number of pages4
JournalEconomics Letters
Volume143
DOIs
StatePublished - 1 Jun 2016

Keywords

  • Information disclosure
  • Multiple equilibria
  • Public information
  • Reverse trading

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