Interesting and unfamiliar effects of asymmetric information
What is it about?
The paper has an interesting counterintuitive result. It is as follows. The return obtained by diversification is based on average quality. Similarly, under asymmetric information, the price at which an individual asset can be sold reflects the average quality of assets. Therefore, under some conditions, sale of an asset under asymmetric information is a useful alternative to diversification.
Why is it important?
The model in the paper can explain why the ratio of real assets to financial assets is higher in emerging economies than in developed countries.
The following have contributed to this page: Gurbachan Singh
In partnership with: