Economic Theory

, Volume 25, Issue 2, pp 353–379 | Cite as

Asymmetric information and survival in financial markets

  • Emanuela Sciubba
Research Article


In the evolutionary setting for a financial market developed by Blume and Easley (1992), we consider an infinitely repeated version of a model á la Grossman and Stiglitz (1980) with asymmetrically informed traders. Informed traders observe the realisation of a payoff relevant signal before making their portfolio decisions. Uninformed traders do not have direct access to this kind of information, but can partially infer it from market prices. As a counterpart for their privileged information, informed traders pay a per period cost. As a result, information acquisition triggers a trade-off in our setting. We prove that, so long as information is costly, uninformed traders survive.

Keywords and Phrases:

Asymmetric information Evolution Portfolio rules. 


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Copyright information

© Springer-Verlag Berlin/Heidelberg 2005

Authors and Affiliations

  1. 1.Faculty of Economics and PoliticsUniversity of CambridgeCambridgeUK

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