Time: 1.00pm - 2.00pm
Venue: R405 (FMG Conference room), 4th Floor, Lionel Robbins Building.
Speaker: Albert S. (Pete) Kyle (University of Maryland)
Seminar title: Smooth Trading with Overconfidence and Market Power
Abstract: We describe a symmetric continuous-time model of trading among relatively overconfident, oligopolistic informed traders with exponential
utility. Traders agree to disagree about the precisions of their continuous flows of Gaussian private information. With enough disagreement, an equilibrium exists in which the price reveals the average of all traders’ signals immediately but traders trade gradually toward target inventories. The price is a linear function of a trader’s inventory, the derivative of a trader’s inventory, and the average of other traders’ valuations. Faster-than-equilibrium trading increases temporary impact, generating “flash crashes.” A “Keynesian beauty contest” dampens price fluctuations.
Professor Albert S. (Pete) Kyle has been the Charles E. Smith Chair Professor of Finance at the University of Maryland’s Robert H. Smith School of Business since 2006. He earned is B.S. degree in mathematics from Davidson College (summa cum laude, 1974), studied philosophy and economics at Oxford University as a Rhodes Scholar from Texas (Merton College, 1974-1976, and Nuffiled College, 1976-1977), and completed his Ph.D. in economics at the University of Chicago in 1981. He has been a professor at Princeton University (1981-1987), the University of California Berkeley (1987-1992), and Duke University (1992-2006).
Professor Kyle’s research focuses on market microstructure, including topics such as high frequency trading, informed speculative trading, market manipulation, price volatility, the informational content of market prices, market liquidity, and contagion.
** Please note that this seminar will take place on a Tuesday and not a Friday as is usual.
