Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).
Please note that all times are shown in the time zone of the conference. The current conference time is: 21st Apr 2025, 01:07:46pm CEST
Kyle Meets Friedman: Informed Trading When Anticipating Future Information
Prof. Hongjun Yan1, Prof. Liyan Yang2, Prof. Xueyong Zhang3, Prof. Deqing Zhou3
1DePaul University; 2University of Toronto, Canada; 3Central University of Finance and Economics
Discussant: Francesco Sangiorgi (Frankfurt School of Finance & Management)
We analyze a model of a monopolistic informed investor who receives private information sequentially and faces a post-trading disclosure requirement. We show that this trading model can be transformed into a fictitious consumption-saving model with a borrowing constraint. Hence, insights from the consumption-saving literature can be adapted for the trading model. For example, analogous to the insights from the permanent income hypothesis, the informed investor ``saves'' more of his current information when expecting less future information advantage (``saving for rainy days'') or more uncertainty about it (``precautionary saving'') and smooths his information ``usage'' over time (``consumption smoothing'').
Competition and Collusion Among Strategic Traders Who Face Uncertainty
George Malikov1, Snehal Banerjee2
1University of Western Ontario, Ivey Business School; 2University of Michigan, Stephen M. Ross School of Business
Discussant: Jean-Edouard Colliard (HEC Paris)
Conventional wisdom holds that informed investors benefit from colluding in their trading. However, we show that this may not hold when investors face uncertainty about other traders’ behavior. In a Kyle (1985) framework, we compare trading profits under collusive and competitive equilibria when informed investors face uncertainty about liquidity trading volatility. While low uncertainty favors collusion, we show that the expected profit of an individual investor under competition can be higher than the total profits for all investors under collusion when uncertainty is sufficiently high. This finding cautions against relying solely on profits to detect collusive behavior.
