TY  - JOUR
ID  - publications25622
UR  - http://tse-fr.eu/pub/31599
IS  - 2
A1  - Hörner, Johannes
A1  - Lovo, Stefano
A1  - Tomala, Tristan
N2  - We analyze security price formation in a dynamic setting in which long-lived dealers repeatedly compete for trading with potentially informed retail traders. For a class of market microstructure models, we characterize equilibria in which dealers’ dynamic pricing strategies are optimal no matter the private information each dealer may possess. In a generalized version of the Glosten and Milgrom model, these equilibria deliver price dynamics reminiscent of well-known stylized facts: price/trading-flow correlation, volatility clustering, price bubble and inventory/inter-dealer trading correlation.
VL  - 127
TI  - Belief-free Price Formation
AV  - public
EP  - 365
Y1  - 2018/02//
PB  - Elsevier
JF  - Journal of Financial Economics
KW  - Financial Market Microstructure
KW  - Belief-free Equilibria
KW  - Informed Market Makers
KW  - Price Volatility
SN  - 0304-405X
SP  - 342
ER  -