SELECTED WORKS

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.

Economics, Economic Theory and Finance

January, 2022

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

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