INSTITUTO MILENIO IMPERFECCIONES DE MERCADO Y POLÍTICA PÚBLICAS

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Speed Acquisition

Abstract

Speed has become a signature of modern financial markets. This paper studies investors’ endogenous speed acquisition, alongside their information acquisition. In equilibrium, speed heterogeneity across investors arises and temporally fragments the process of price discovery. Intra- and intertemporal competition among fast and slow investors drives the speed and the information acquisition to be either substitutes or complements. The model prediction cautions the dysfunction of information aggregation in the financial market: An advancement in the information technology might worsen price efficiency, because the complementarity can incentivize speed acquisition that further fragments price discovery temporally.

INSEAD

Location:

Sala de Consejo, Beauchef 851, Floor 4 - Departamento de Ingeniería Industrial, U. de Chile

Speaker:

Bart Z. Yueshen

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