Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/207091 
Year of Publication: 
2018
Series/Report no.: 
WWZ Working Paper No. 2018/22
Publisher: 
University of Basel, Center of Business and Economics (WWZ), Basel
Abstract: 
Generalizing the idea that price momentum can be explained by different levels of uncertainty inherent in the information structure, we implement signal-specific differences in uncertainty in a Kyle type model of strategic trading. We derive the equilibrium in a single-auction setting as well as a two-trading-period model. We show that the two-period equilibrium supports price patterns like momentum and reversal/under- and over-reaction without relying on any additional behavioral assumptions. Furthermore, the two-period setting can be extended to a multiple-trading-period equilibrium model with very similar equilibrium conditions to the original sequential auction equilibrium proposed by Kyle (1985), while preserving the price pattern of the two-period model.
Subjects: 
Market structure
Asset Pricing
Market Efficiency
Asymmetric Information
Equilibrium
JEL: 
D43
D82
G12
G14
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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