| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 5060304 | Economics Letters | 2011 | 4 Pages |
Abstract
This work sets the market maker as overconfident and shows that this will lead to a higher informed trading intensity, a more efficient market, a larger informed profit and a lower adverse selection.
⺠I present a model where the market maker owns a public signal and overestimates its precision. ⺠I examine the effects of overconfidence on the equilibrium outcomes. ⺠Overconfidence will enhance the informed trading intensity, profit and market efficiency. ⺠Overconfidence will decrease the adverse selection.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Deqing Zhou,