Asset Pricing under Asymmetric Information: Bubbles, Crashes, Technical Analysis, and Herding

Hardcover | January 1, 2001

byMarkus K. Brunnermeier

not yet rated|write a review
Asset prices are driven by public news and information that is often dispersed among many market participants. These agents try to infer each other's information by analyzing price processes. In the past two decades, theoretical research in financial economics has significantly advanced ourunderstanding of the informational aspects of price processes. This book provides a detailed and up-to-date survey of this important body of literature.The book begins by demonstrating how to model asymmetric information and higher-order knowledge. It then contrasts competitive and strategic equilibrium concepts under asymmetric information. It also illustrates the dependence of information efficiency and allocative efficiency on the securitystructure and the linkage between both efficiency concepts. No-Trade theorems and market breakdowns due to asymmetric information are then explained, and the existence of bubbles under symmetric and asymmetric information is investigated.The remainder of the survey is devoted to contrasting different market microstructure models that demonstrate how asymmetric information affects asset prices and traders' information , which provide a theoretical explanation for technical analysis and illustrate why some investors "chase the trend."The reader is then introduced to herding models and informational cascades, which can arise in a setting where agents' decision-making is sequential. The insights derived from herding models are used to provide rational explanations for stock market crashes. Models in which all traders are inducedto search for the same piece of information are then presented to provide a deeper insight into Keynes' comparison of the stock market with a beauty contest. The book concludes with a brief summary of bank runs and their connection to financial crises.

Pricing and Purchase Info

$141.30 online
$153.50 list price (save 7%)
Ships within 1-3 weeks
Ships free on orders over $25

From the Publisher

Asset prices are driven by public news and information that is often dispersed among many market participants. These agents try to infer each other's information by analyzing price processes. In the past two decades, theoretical research in financial economics has significantly advanced ourunderstanding of the informational aspects of ...

Markus K. Brunnermeier is an Assistant Professor in the Department of Economics at Princeton University, where he teaches courses in financial economics. He was previously a member of the Financial Markets Group at the London School of Economics.

other books by Markus K. Brunnermeier

The Euro and the Battle of Ideas
The Euro and the Battle of Ideas

Hardcover|Aug 30 2016

$39.94 online$43.95list price(save 9%)
Managing the Liquidity and Credit Crunch: Monitoring the European Central Bank
Managing the Liquidity and Credit Crunch: Monitoring th...

Paperback|Jul 26 2016

$45.45 online$56.50list price
Format:HardcoverDimensions:272 pages, 9.21 × 6.14 × 0.75 inPublished:January 1, 2001Publisher:Oxford University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0198296983

ISBN - 13:9780198296980

Customer Reviews of Asset Pricing under Asymmetric Information: Bubbles, Crashes, Technical Analysis, and Herding

Reviews

Extra Content

Table of Contents

1. Information, Equilibrium, Efficiency Concepts2. No-Trade Theorems, Asset Pricing, Bubbles3. Market Microstructure Models4. Dynamic Models, Technical Analysis and Volume5. Herding and Informational Cascades6. Crashes, Investigative Herding, Bank Runs

Editorial Reviews

This timely book provides an invaluable map for students and researchers navigating the literature on market microstructure, and more generally, on equilibrium with asymmetric information. It will become highly recommended reading for graduate courses in the economics of uncertainty and infinancial economics. Hyun Song Shin, Professor of Finance at the London School of Economicsr