کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
5053797 | 1476522 | 2015 | 7 صفحه PDF | دانلود رایگان |
- We develop a model where the outsider is overconfident on the shared information.
- A more confident outsider trades less aggressively on his information.
- The overconfidence of the outsider leads to a larger insider's expected profits.
- The overconfidence of the outsider leads to a less efficient and less stable market.
This article develops a strategic trading model in which the outsider is overconfident on the shared information. Our result shows that a more confident outsider underreacts to his information in the sense that he trades less aggressively on his information, leading to a less profit in the trading. However, the insider trades more aggressively on the shared information and less aggressively on the private information when he faces a more overconfident outsider. Also, the overconfidence of the outsider leads to a larger insider's expected profits, an increased expected loss of noise trader, and a less efficient and less stable market.
Journal: Economic Modelling - Volume 46, April 2015, Pages 384-390