Cheap Talk, Fraud and Adverse Selection in Financial Markets: Some Experimental Evidence

1998 ◽  
Author(s):  
Robert Forsythe ◽  
Russell J. Lundholm ◽  
Thomas A. Rietz
Keyword(s):  
Financial Markets ◽  
Experimental Evidence ◽  
Adverse Selection ◽  
Cheap Talk

Cheap Talk, Fraud, and Adverse Selection in Financial Markets: Some Experimental Evidence

1999 ◽  
Vol 12 (3) ◽  
pp. 481-518 ◽  
Author(s):  
Robert Forsythe ◽  
Russell Lundholm ◽  
Thomas Rietz
Keyword(s):  
Financial Markets ◽  
Experimental Evidence ◽  
Adverse Selection ◽  
Cheap Talk

scholarly journals Is Trading Fast Dangerous?

2018 ◽  
pp. 9-27 ◽  
Author(s):  
Thierry Foucault ◽  
Sophie Moinas
Keyword(s):  
Financial Markets ◽  
Adverse Selection ◽  
Policy Making ◽  
Information Technologies ◽  
Empirical Literature ◽  
Market Quality ◽  
Gains From Trade ◽  
Adverse Selection Costs

This chapter discusses the findings of the growing theoretical and empirical literature on trading speed in financial markets. The speed of trading has increased significantly in recent years, due to progress in information technologies and automation of the trading process. This evolution raises many questions about the effects of trading speed. It is argued that an increase in trading speed raises adverse selection costs but increases competition among liquidity providers and the rate at which gains from trade are realized. Thus, the effect of an increase in trading speed on market quality and welfare is inherently ambiguous. This observation is important for assessing empirical findings regarding the effects of trading speed and policy-making.

Only the Illusion of Possible Collusion? Cheap Talk and Similar Goals: Some Experimental Evidence

2001 ◽  
Vol 20 (1) ◽  
pp. 27-37 ◽  
Author(s):  
Marian Chapman Moore ◽  
Ruskin M. Morgan ◽  
Michael J. Moore
Keyword(s):  
Experimental Evidence ◽  
Cheap Talk

Adverse selection and reputation in a world of cheap talk

2010 ◽  
Vol 50 (4) ◽  
pp. 548-558 ◽  
Author(s):  
Craig A. Depken ◽  
Ying Zhang
Keyword(s):  
Adverse Selection ◽  
Cheap Talk

Unobservable Risk Preferences and Value of Information in Financial Markets with Adverse Selection

1996 ◽  
Vol 11 (2) ◽  
pp. 197-222 ◽  
Author(s):  
Bharat Sarath ◽  
Ramachandran Natarajan
Keyword(s):  
Financial Markets ◽  
Adverse Selection ◽  
Value Of Information ◽  
Risk Preferences ◽  
Cash Flows ◽  
Risk Characteristics ◽  
Public Signal ◽  
Empirical Implications ◽  
Separating Equilibrium ◽  
Informational Value

We demonstrate the existence of a partially separating equilibrium based on the level of equity retention when a project of unknown value is taken public by an entrepreneur whose risk preferences are unobservable. We show that any such equilibrium results in some (endogenous) strictly positive level of equity retention. The value of a second public signal corresponding to audited reports required under the 1933 Securities Act is also analyzed. We show that this second signal derives informational value from the presence of unobservable risk preferences even though it only concerns cash flows and is completely independent of risk characteristics. The paper concludes with some empirical implications.

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