A. Subrahmanyam, “Risk Aversion, Market Liquidity, and Price Efficiency,” Review of Financial Studies, Vol. 4, No. 3, 1991, pp. 416-441. doi:10.1093/rfs/4.3.417
has been cited by the following article:
TITLE: Call Auction Markets with Risk-Averse Specialists
AUTHORS: Paolo Vitale
KEYWORDS: Risk-Aversion, Call Auction Markets, Linear Bayesian Equilibria
JOURNAL NAME: Theoretical Economics Letters, Vol.2 No.2, May 23, 2012
ABSTRACT: We study a generalization of Kyle’s (1985) model to the case in which the specialist is risk-averse and does not set the transaction price according to semi-strong form efficiency. We see that Kyle’s call auction market is no longer a robust market structure, as linear Bayesian equilibria do not exist, irrespective of fundamentals, such as agents’ information, endowments and preferences. This result holds both when customers can submit only market orders and when limit orders are allowed too.