The asymmetrical Acquisition of information about the range of asset value in market

2025-08-13

AI Summary

This paper investigates asymmetric access to interval-valued information about asset fundamentals among investors in financial markets. To model uninformed traders’ behavior, we develop a decision-theoretic framework grounded in the max-min ambiguity-averse criterion, integrating both signaling and noise-trading mechanisms. We systematically analyze how interval-based information asymmetry affects price formation, market liquidity, and signal sensitivity. Theoretical results show that such asymmetry exerts a bidirectional effect: under low noise or strong signals, it enhances pricing efficiency and liquidity; conversely, under high noise or weak signals, it induces trading frictions and market freezing. This study is the first to incorporate ambiguity aversion into an interval-information-asymmetry setting, uncovering a continuous, dynamic response mechanism linking liquidity and signal sensitivity. It thereby extends the theoretical boundaries and applicability of information asymmetry models in environments characterized by Knightian uncertainty.

Technology Category

• Game Theory and Economic Paradigms: Imperfect Information
• Reasoning under Uncertainty: Other Foundations of Reasoning under Uncertainty
• Multiagent Systems: Mechanism Design

Application Category

• Economics, Online Markets and Human Computation: Fairness, privacy, and diversity in economic environments
• Security and Privacy: Large-scale security measurements
• Semantics and Knowledge: Methods to enhance, augment, integrate or synergize semantic models such as knowledge graphs and LLMs

Abstract

The information investors acquire in asset markets has various forms. We refer to range information as information about the upper and lower bound which the payoff of an asset may reach in the future. This paper explores the market impacts of investors' asymmetrical acquisition of range information. Uninformed traders are inherently unable to directly obtain the private signal held by informed traders. This study shows that when range information is released to investors asymmetrically, uninformed traders who can only obtain rougher range information will not trade assets under the max-min ambiguity aversion criterion. Investors' asymmetrical acquisition of range information can cause that market liquidity and the sensitivity of market price to private signal vary continuously with the signal and noise trading volume. We also reveal that investors' asymmetrical acquisition of range information can increase market liquidity and the sensitivity of price under some conditions and decrease them under some other conditions.

Problem

• Explores market impacts of asymmetrical range information acquisition
• Studies uninformed traders' behavior under max-min ambiguity aversion
• Analyzes how information asymmetry affects liquidity and price sensitivity

Innovation

• Asymmetrical range information acquisition impacts markets
• Max-min ambiguity aversion affects uninformed traders
• Market liquidity varies with signal and noise