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An Equilibrium Model of Asset Trading with Sequential Information Arrival
Author(s) -
JENNINGS ROBERT H.,
STARKS LAURA T.,
FELLINGHAM JOHN C.
Publication year - 1981
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1981.tb03540.x
Subject(s) - margin (machine learning) , asset (computer security) , economics , relation (database) , econometrics , price discovery , market price , financial market , process (computing) , microeconomics , financial economics , computer science , finance , futures contract , data mining , operating system , computer security , machine learning
In an effort to better understand the dynamic market price adjustment process, this paper develops a model which describes the impact of new information on a financial market. The primary emphasis is on the price change‐volume relationship in the presence of a margin requirement. We find that the margin requirement significantly affects the relation of price change to volume. Furthermore, this relationship is shown to be affected by the number of investors in the market, the degree of information dissemination, differences in interpretation of information and the implicit cost of the margin requirement.