Is Kyle’s equilibrium model stable?

Cetin, Umut

; and Larsen, Kasper (2024) Is Kyle’s equilibrium model stable? Mathematics and Financial Economics, 18 (4). 623 - 639. ISSN 1862-9679

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In the dynamic discrete-time trading setting of Kyle (1985), we prove that Kyle’s equilibrium model is stable when there are one or two trading times. For three or more trading times, we prove that Kyle’s equilibrium is not stable. These theoretical results are proven to hold irrespectively of all Kyle’s input parameters.

Item Type	Article
Keywords	market microstructure theory,stability,informed trading,fixed points
Departments	Statistics
DOI	10.1007/s11579-024-00364-0
Date Deposited	07 May 2024 10:42
URI	https://researchonline.lse.ac.uk/id/eprint/122935

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https://link.springer.com/journal/11579 (Author)
https://www.lse.ac.uk/statistics/people/umut-cetin (Author)
http://www.scopus.com/inward/record.url?scp=85194232318&partnerID=8YFLogxK (Scopus publication)

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