Consider the model proposed in Subrahmanyam [1575] and presented in Sect. 10.2. In the setting of Proposition
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Consider the model proposed in Subrahmanyam [1575] and presented in Sect. 10.2. In the setting of Proposition 10.4, suppose that all the \(N\) informed traders are risk neutral, in the sense that \(a \rightarrow 0\). Show that, in this case, the equilibrium value of \(\lambda\) is given by
\[\lambda=\frac{1}{N+1} \sqrt{\frac{N}{1+\sigma_{\eta}^{2}}}\]
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Financial Markets Theory Equilibrium Efficiency And Information
ISBN: 9781447174042
2nd Edition
Authors: Emilio Barucci, Claudio Fontana
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