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BEGIN:VEVENT
UID:b7dbf8cd58a23d3d38765a91f6d8f919
CATEGORIES:Seminars
CREATED:20150211T143858
SUMMARY:Peter Kondor - Central European University
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:Inattention in Crowded Markets\nAbstract:\nWe present a novel model of crow
 ded markets and rational inattention. Our main application is a financial m
 arket where early entrants can buy low (far from fundamentals) and sell hig
 h (close to fundamentals). Early entrants bid up the price for late entrant
 s, while late entrants increase the exit price for early entrants. The orde
 r when an investor learns the existence of this opportunity is her type. Be
 fore entry, the investor can also learn on about how many are already enter
 ed which determines the attractiveness of the opportunity. However, such le
 arning is costly. Our analysis emphasize two sources of inefficiency: the i
 nefficiency of the entry decision (which can lead to crowding), and the ine
 fficiency of the learning decision. Our model predicts under-entry in trans
 parent markets, over-entry in opaque markets and over-learning in all types
  of markets. We show that sometimes more opaque markets provide higher welf
 are. We also show that as the proportion of sophisticated traders is increa
 sing in global markets, crowding might not increase. Also, welfare might be
  higher in a market with very few sophisticated investors, even if they do 
 not eliminate arbitrage opportunities. Our results also provide a rational 
 for the increasing popularity of exclusive, and opaque trading venues as bl
 ack pools.\n
DTSTAMP:20260406T014210Z
DTSTART:20141006T173000Z
DTEND:20141006T190000Z
SEQUENCE:0
TRANSP:OPAQUE
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