SELECTED WORKS

of Jaime Luque

Working Papers

On Informationally Efficient Security Exchanges and Market Completeness

(2022)
Jaime Luque
Marta Faias
ABSTRACT

In an equilibrium model that abstracts from the particular form of the market, Grossman and Stiglitz (1980) show that when the efficient markets hypothesis is true and information is costly, competitive markets break down. We refute this result when traders sort into security exchanges that can be lit (i.e, exchange gathers and reveals costly information to its members) or opaque (i.e., no information is provided). We also refute the result that a complete market structure cannot emerge in a competitive equilibrium when information is costly. The market completeness or incompleteness in a securities exchange depends on its information cost function.

DISCIPLINES

Economics, Economic Theory and Finance

PUBLICATION DATE

January, 2022

CITATION INFORMATION

Jaime Luque and Marta Faias. "On Informationally Efficient Security Exchanges and Market Completeness" (2022)
Available at: http://works.bepress.com/luque/66/

CREATIVE COMMONS LICENSE

Creative Commons License
Creative Commons License This work is licensed under a Creative Commons CC_BY-NC-ND International License.

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