The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

No Trade Theorems

  • Ricardo Serrano-Padial
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_2908

Abstract

No trade theorems represent a class of results showing that, under certain conditions, trade in asset markets between rational agents cannot be explained on the basis of differences in information alone. They pose a challenge to provide a theoretical justification of the high trade volumes observed in financial markets. This article overviews existing no trade theorems and discusses alternative approaches to modelling information-based trade.

Keywords

Asset markets Demand shocks No trade theorems Trade volume Uncertainty 
This is a preview of subscription content, log in to check access

Bibliography

  1. Acemoglu, D., V. Chernozhukov, and M. Yildiz. 2009. Fragility of asymptotic agreement under Bayesian learning. Mimeo.Google Scholar
  2. Andreoni, J., and T. Mylovanov. 2010. Diverging opinions. Mimeo.Google Scholar
  3. Aumann, R.J. 1976. Agreeing to disagree. Annals of Statistics 4: 1236–1239.CrossRefGoogle Scholar
  4. Diamond, D.W., and R.E. Verrecchia. 1981. Information aggregation in a noisy rational expectations economy. Journal of Financial Economics 9: 221–235.CrossRefGoogle Scholar
  5. Dow, J., Madrigal, V., and Werlang, S.d.C. 1990. Preferences, common knowledge and speculative trade. IFA Working Paper, pp. 125–190.Google Scholar
  6. Easley, D., and M. O’Hara. 1992. Time and the process of security price adjustment. Journal of Finance 47(2): 577–605.CrossRefGoogle Scholar
  7. Geanakoplos, J.D. 1989. Game theory without partitions, and applications to speculation and consensus. Cowles Foundation Discussion Paper No. 914.Google Scholar
  8. Geanakoplos, J. 1994. Common knowledge. In Handbook of Game Theory II, ed. R. Au-mann and S. Hart, 1437–1496. Amsterdam: Elsevier Science.Google Scholar
  9. Glosten, L.R., and P.R. Milgrom. 1985. Bid, ask and transaction prices in a specialist market with heterogeneously informed traders. Journal of Financial Economics 14: 71–100.CrossRefGoogle Scholar
  10. Grossman, S.J., and J.E. Stiglitz. 1980. On the impossibility of informationally efficient markets. American Economic Review 70(3): 393–408.Google Scholar
  11. Hakansson, N.H., J.G. Kunkel, and J.A. Ohlson. 1982. Sufficient and necessary conditions for information to have social value in pure exchange. Journal of Finance 37: 1169–1181.CrossRefGoogle Scholar
  12. Hellwig, M.F. 1980. On the aggregation of information in competitive markets. Journal of Economic Theory 22: 477–498.CrossRefGoogle Scholar
  13. Holmstrom, B., and R.B. Myerson. 1983. Efficient and durable decision rules with incomplete information. Econometrica 51(6): 1799–1819.CrossRefGoogle Scholar
  14. Kajii, A., and T. Ui. 2009. Interim efficient allocations under uncertainty. Journal of Economic Theory 144(1): 337–353.CrossRefGoogle Scholar
  15. Kreps, D.M. 1977. A note on ‘fulfilled expectations’ equilibria. Journal of Economic Theory 14: 32–44.CrossRefGoogle Scholar
  16. Kyle, A.S. 1985. Continuous auctions and insider trading. Econometrica 53(6): 1315–1336.CrossRefGoogle Scholar
  17. Kyle, A.S. 1989. Informed speculation with imperfect competition. Review of Economic Studies 56(3): 317–355.CrossRefGoogle Scholar
  18. Milgrom, P.R., and N. Stokey. 1982. Information, trade and common knowledge. Journal of Economic Theory 26: 17–27.CrossRefGoogle Scholar
  19. Monderer, D., and D. Samet. 1989. Approximating common knowledge with common beliefs. Games and Economic Behavior 1: 170–190.CrossRefGoogle Scholar
  20. Morris, S. 1994. Trade with heterogeneous prior beliefs and asymmetric information. Econometrica 62(6): 1327–1347.CrossRefGoogle Scholar
  21. Neeman, Z. 1996. Common beliefs and the existence of speculative trade. Games and Economic Behavior 16: 77–96.CrossRefGoogle Scholar
  22. Rubinstein, A. 1975. Security market efficiency in an Arrow–Debreu economy. American Economic Review 65: 812–824.Google Scholar
  23. Rubinstein, A., and A. Wolinsky. 1990. On the logic of ‘agreeing to disagree’ type results. Journal of Economic Theory 51: 184–193.CrossRefGoogle Scholar
  24. Sebenius, J.K., and J.D. Geanakoplos. 1983. Don’t bet on it: contingent agreements with asymmetric information. Journal of the American Statistical Association 78: 424–426.CrossRefGoogle Scholar
  25. Tirole, J. 1982. On the possibility of speculation under rational expectations. Econometrica 50(5): 1163–1182.CrossRefGoogle Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Ricardo Serrano-Padial
    • 1
  1. 1.