English, Article, Journal or magazine article edition: Market informational inefficiency, risk aversion and quantity grid DÉCAMPS, Jean-Paul; LOVO, Stefano; DECAMPS, Jean-Paul

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Market informational inefficiency, risk aversion and quantity grid
Author
  • DÉCAMPS, Jean-Paul
  • LOVO, Stefano
  • DECAMPS, Jean-Paul
Physical Description
  • preprint
Notes
  • RePEc:ide:wpaper:626
  • In this paper we show that long run market informational inefficiency is perfectly compatible with standard rational sequential trade models. Our inefficiency result is obtained taking into account two features of actual financial markets: tradable quantities belong to a quantity grid and traders and market makers do not have the same degree of risk aversion. The implementation of our model for reasonable values of the parameters suggests that the long term deviations between asset prices and fundamental value are important. We explain the ambiguous role of the quantity grid in exacerbating or mitigating market inefficiency. We show that stock splits can improve the information content of the order flow and consequently increase price volatility.
  • informational efficiency; quantity grid; stock splits
  • RePEc:ebg:heccah:0770
Language
  • English
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