Bid, ask and transaction prices in a specialist market with heterogeneously informed traders

@article{Glosten1985BidAA,
  title={Bid, ask and transaction prices in a specialist market with heterogeneously informed traders},
  author={Lawrence R. Glosten and Paul R. Milgrom},
  journal={Journal of Financial Economics},
  year={1985},
  volume={14},
  pages={71-100}
}

Limit orders, asymmetric information, and the formation of asset prices with a computerized specialist

We analyze the existence of equilibrium in an asset market under asymmetric information. Price formation is modeled as a bilateral sealed bid auction where uninformed and informed traders submit

Trading Volume and Transaction Costs in Specialist Markets

Prior work with competitive rational expectations equilibrium models indicates that there should be a positive relation between trading volume and differences in beliefs or information among traders.

Effects of Securities Transaction Taxes on Depth and Bid-Ask Spread

This note investigates the effects of introducing a transaction tax on depth and bid-ask spread using a static model where a competitive market maker faces informed and liquidity traders. When the

The Impact of Competition and Information on Intraday Trading

In a dynamic model of financial market trading multiple heterogeneously informed traders choose when to place orders. Better informed traders trade immediately, worse informed delay even though they

Information Asymmetries, Transaction Costs, and the Pricing of Securities

I study a simple market microstructure model in a competitive setting where rational risk neutral investors anticipate becoming liquidity sellers at some future date. That is, being forced to sell

Information Acquisition, Noise Trading, and Speculation in Double Auction Markets*

This paper analyzes information acquisition in double auction markets and shows that for any finite information cost, if the number of traders and the units a trader is allowed to trade are

Trading strategies and trading profits in experimental asset markets with cumulative information

We study the use of trading strategies and their profitability in experimental asset markets with asymmetrically informed traders. We find that insiders make most of their profits from trades which

THE DEALERS' PRICE/SIZE QUOTE AND MARKET LIQUIDITY

We model trading in a competitive securities market where informed traders and liquidity traders transact with dealers. The dealers' entire published quote is modeled: bid-ask prices and the number

Information and Market Price Manipulation in the Unique Equilibrium of a Sequential Trade Model – Preliminary and Incomplete –

In asymmetric information models of financial markets, trading behavior imperfectly reveals the private information held by traders. Informed traders who trade dynamically thus have an incentive not

Imperfect Competition and Market Liquidity with a Supply Informed Trader

We develop a model of insider trading where agents have private information either about liquidation value or about supply and behave strategically to maximize their profits. The supply informed
...

References

SHOWING 1-10 OF 19 REFERENCES

Information Effects on the Bid‐Ask Spread

An individual who chooses to serve as a market-maker is assumed to optimize his position by setting a bid-ask spread which maximizes the difference between expected revenues received from

A Simple Implicit Measure of the Effective Bid‐Ask Spread in an Efficient Market

In an efficient market, the fundamental value of a security fluctuates randomly. However, trading costs induce negative serial dependence in successive observed market price changes. In fact, given

Optimal dealer pricing under transactions and return uncertainty

Information, Trade, and Common Knowledge

ON THE EFFICIENCY OF COMPETITIVE STOCK MARKETS WHERE TRADES HAVE DIVERSE INFORMATION

I HAVE SHOWN elsewhere that competitive markets can be "over-informationally" efficient. (See Grossman [1975] for this and a review of other work in this area.) If competitive prices reveal too much

Dealership market: Market-making with inventory

The relationship between return and market value of common stocks