Topic
Private information retrieval
About: Private information retrieval is a research topic. Over the lifetime, 2931 publications have been published within this topic receiving 78127 citations. The topic is also known as: PIR.
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TL;DR: In this article, the authors investigate the role of information in affecting a firm's cost of capital, and they show that differences in the composition of information between public and private information affect the costs of capital.
Abstract: We investigate the role of information in affecting a firm's cost of capital. We show that differences in the composition of information between public and private information affect the cost of capital, with investors demanding a higher return to hold stocks with greater private information. This higher return arises because informed investors are better able to shift their portfolio to incorporate new information, and uninformed investors are thus disadvantaged. In equilibrium, the quantity and quality of information affect asset prices. We show firms can influence their cost of capital by choosing features like accounting treatments, analyst coverage, and market microstructure.
2,082 citations
TL;DR: In this article, the authors examine the impact of public information in a setting where agents take actions appropriate to the underlying fundamentals, but they also have a coordination motive arising from a strategic complementarity in their actions.
Abstract: What are the welfare effects of enhanced dissemination of public information through the media and disclosures by market participants with high public visibility? For instance, is it always desirable to have frequent and timely publications of economic statistics by government agencies and the central bank? We examine the impact of public information in a setting where agents take actions appropriate to the underlying fundamentals, but they also have a coordination motive arising from a strategic complementarity in their actions. When the agents have no private information, greater provision of public information always increases welfare. However, when agents also have access to independent sources of information, the welfare effect of increased public disclosures is ambiguous.
1,849 citations
TL;DR: In this article, the interactions of security trades and quote revisions are modeled as a vector autoregressive system and the extent of the information asymmetry is measured as the ultimate price impact of the trade innovation.
Abstract: This paper suggests that the interactions of security trades and quote revisions be modeled as a vector autoregressive system. Within this framework, a trade's information effect may be meaningfully measured as the ultimate price impact of the trade innovation. Estimates for a sample of NYSE issues suggest: a trade's full price impact arrives only with a protracted lag; the impact is a positive and concave function of the trade size; large trades cause the spread to widen; trades occurring in the face of wide spreads have larger price impacts; and, information asymmetries are more significant for smaller firms. CENTRAL TO THE ANALYSIS of market microstructure is the notion that in a market with asymmetrically informed agents, trades convey information and therefore cause a persistent impact on the security price. The magnitude of the price effect for a given trade size is generally held to be a positive function of the proportion of potentially informed traders in the population, the probability that such a trader is in fact informed (i.e., the probability that a private information signal has in fact been observed), and the precision of the private information. The close dependence of the price impact on these factors, which may be referred to as the extent of the information asymmetry, provides a strong motivation for the empirical determination of this impact. This paper strives to achieve such a determination in a framework that is robust to deviations from the assumptions of the formal models. In the process, the framework establishes a rich characterization of the dynamics by which trades and quotes interact. The market considered here is a specialist market in which a designated market-maker exposes bid and ask quotes to the trading public. An extensive theory has evolved that analyzes the market-maker's exposure to traders with superior information.' Concerning the extent of the information asymmetry, this body of theory yields two important empirical predictions: first,
1,800 citations
TL;DR: In this paper, it was shown that risk-averse traders can still never agree to any non-null trade when they receive private information, and that an equilibrium with fully revealing price changes always exists, and even at other equilibria the information revealed by price changes “swamps” each trader's private information.
1,662 citations
TL;DR: In this article, it is shown that financial intermediaries arise endogenously within an environment in which the investment opportunities of agents are private information and it is established that financial intermediary are part of an efficient arrangement in the sense that they are needed to support the authors' private information core allocations.
1,110 citations