Can public information promote market stability?

作者:Chen, BB(Chen, Binbin)^[1];Liu, SC(Liu, Shancun)^[1];Zhang, Q(Zhang, Qiang)^[2]  

We study the effect of public information revealing part of underlying fundamentals on market stability. It shows that accurate public information reduces the uncertainty faced by informed traders and increases their responsiveness to private information and expected volume. The reverse trading and multiple equilibria arise under lower public information precision and they disappear when public information precision increases sufficiently. (C) 2016 Elsevier B.V. All rights reserved.