Transparency and Distressed Sales Under Asymmetric Information

Fuchs, William; Oery, Aniko; Skrzypacz, Andrzej

doi:10.2139/ssrn.2563007

Cited by 8 publications

(3 citation statements)

References 18 publications

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“…The role of transparency in offers has been previously analyzed by Nöldeke and van Damme (1990), Swinkels (1999), Hörner and Vieille (2009) and Fuchs et al (2015). The two most important differences with respect to these papers are that: first, we consider the transparency of transaction data while they all consider the transparency of rejected offers.…”

Section: Related Literaturementioning

confidence: 99%

Information Spillovers in Asset Markets with Correlated Values

2015

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We study the effect of information spillovers and transparency in a dynamic setting with adverse selection and correlated asset values. A trade (or lack thereof) by one seller can provide information about the quality of other assets in the market. In equilibrium, the information content of this trading behavior is endogenously determined. We show that this endogeneity of information leads to multiple equilibria when the correlation between asset values is sufficiently high. That is, if buyers expect "bad" assets to trade quickly, then a seller with a bad asset has reason to be concerned about negative information being revealed, which induces her to trade quickly. Conversely, if buyers do not expect bad assets to trade quickly, then the seller has less to be concerned about and is more willing to wait. We study the implications for policies that target market transparency.We show that total welfare is higher when markets are fully transparent than when the market is fully opaque. However, both welfare and trading activity can decrease in the degree of market transparency. * Affiliation: CREi, Universitat Pompeu Fabra, and Barcelona GSE.

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Section: Related Literaturementioning

confidence: 99%

Information Spillovers in Asset Markets with Correlated Values

2015

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“…Our work also connects to the literature studying cross-country differences in income 4 See, for example, Janssen and Roy (2002), Hörner and Vieille (2009), Daley and Green (2012, (forthcoming), and Fuchs et al (2014).…”

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confidence: 53%

Adverse Selection, Slow Moving Capital and Misallocation

2013

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We embed adverse selection into a dynamic, general equilibrium model with heterogeneous capital and study its implications for aggregate dynamics. The friction leads to delays in firms' divestment decisions and thus slow recoveries from shocks, even when these shocks do not affect the economy's potential output. The impediments to reallocation increase with the dispersion in productivity and decrease with the interest rate, the frequency of sectoral shocks, and households' consumption smoothing motives. When households are risk averse, delaying reallocation serves as a hedge against future shocks, which can lead to persistent misallocation. Our model also provides a micro-foundation for convex adjustment costs and a link between the nature of these costs and the underlying economic environment.

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“…The transparency of offers has been studied by Nöldeke and van Damme (1990), Swinkels (1999), Hörner andVieille (2009), andFuchs, Öry, andSkrzypacz (2016). Our work differs in two important respects.…”

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confidence: 98%

Information Spillovers in Asset Markets with Correlated Values

Asriyan

Fuchs²,

Green

2017

American Economic Review

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When asset values are correlated and sellers are privately informed, a trade of one asset can be informative about the value of other assets, which can in turn influence the trading decision of others. These "information spillovers" can play an important role in determining the manner and the efficiency with which assets are reallocated.In this paper, we develop a stylized framework to understand the role of information spillovers. The model involves two sellers (for convenience, we refer to them as Ann and Bob), each with an indivisible asset that has a value which is either low or high. Each seller is privately informed about the value of their asset. There is common knowledge of gains from trade, but buyers face a lemons problem (Akerlof * Asriyan: CREI, Ramon Trias Fargas, 25-27, Merce Rodoreda Bldg.,

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Transparency and Distressed Sales Under Asymmetric Information

Cited by 8 publications

References 18 publications

Information Spillovers in Asset Markets with Correlated Values

Information Spillovers in Asset Markets with Correlated Values

Adverse Selection, Slow Moving Capital and Misallocation

Information Spillovers in Asset Markets with Correlated Values

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