Complementarities, Multiplicity, and Supply Information

By Jayant V. Ganguli, Liyan Yang. 2009

134 citations recorded by the source corpus.

If traders can obtain private information about the payoff and the supply of a stock then there can exist (i) complementarity in information acquisition and (ii) multiple equilibria in the financial and information markets. The additional dimension of supply information increases coordination possibilities in the financial market, leading to multiple equilibria. The existence of two information sources can lead to information acquisition being complementary. The multiplicity of equilibria is suggestive of excess volatility and crashes. The different financial market equilibria imply differing patterns of cost of capital and volume of trade. (JEL: D82, D83, G14) (c) 2009 by the European Economic Association.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/8f86edf6778bd385ece992e7c015e497c2d480e4

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Citations in the corpus

Public and Private Learning from Prices, Strategic Substitutability and Complementarity, and Equilibrium Multiplicity (2011, unknown): “…signals or exposure to aggregate risk will constitute private information to the trader and a source which will contribute to multidimensional information in the market (see, for example, Medrano and Vives (2004), Ganguli and Yang (2009), Amador and Weill (2009) and Hatchondo et al. (2010)).”
Illiquidity Contagion and Liquidity Crashes (2014, unknown): “To show this, let us denote the equilibrium with low, Ganguli and Yang (2009) consider a single asset model similar to Grossman and Stiglitz (1980) .”
Government Intervention and Information Aggregation by Prices: Government Intervention and Information Aggregation by Prices (2015, unknown): “This is because in (24) R and w enter only via the term (1 − R)w.”
Learning from Prices: Public Communication and Welfare (2010, unknown): “More recently, however, Ganguli and Yang (2009) have independently studied complementarities similar to ours, but they focus on their implications for information acquisition in noisy-rational financial markets.”
Equilibrium High Frequency Trading (2011, unknown): “Ganguli and Yang (2009) extend the Grossman and Stiglitz (1980) setup to the case where traders can acquire information on the asset’s payoff and also on its (random) supply.”
Trading Frenzies and Their Impact on Real Investment (2013, background): “For example see, Froot, Scharfstein, and Stein (1992), Hirshleifer, Subrahmanyam, and Titman (1994), Bru and Vives (2002), Veldkamp (2006a and 2006b), Ganguli and Yang (2009), Amador and Weil (2011), and Garcia and Strobl (2011).”