Essays on financial market imperfections

This dissertation consists of three chapters on financial market imperfections, in particular, information imperfections. Chapter 1 studies how the existence of a fixed cost per transaction faced by uninformed investors hampers information revelation through price and exacerbates adverse selection. The exacerbated adverse selection explains one long-standing puzzle in finance - the momentum anomaly. Properly adjusting stock returns for adverse selection by using data on trading volume substantially mitigates momentum-based arbitrage profits for the sample period from 1983 to 2004. Chapter 2 studies how information asymmetry prevents perfect risk-sharing and offers insights on stock return behavior. Chapter 3 explores the idea of Tobin's tax in the context of an emerging market and in particular examines the cost effects on speculation in the Chinese stock market.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Economics.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2007

Author dc:creator

• Wu, Ding, Ph. D. Massachusetts Institute of Technology

Advisor dc:contributor.advisor

• Olivier J. Blanchard and Jiang Wang.

• Economics.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/39721

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/39721