Research On The Micro Characteristics Of Financial Markets From The Perspective Of Information Shoc

When there is an information shock that affects the fundamental value of risk assets in the financial market,it needs to take a certain time from the emergence of information to the complete absorption of information by the market.At a certain point,only some traders(informed traders)can observe the information signal affecting the fundamental value of risk assets,while other traders(uninformed traders)can only estimate the information signal.Therefore,the process of information from being generated to being completely digested by the market includes the range of which relatively objective information spreads between market traders and the accuracy to which relatively subjective information content is understood by market traders.Correspondingly,there are two factors of information shocks affecting financial markets: trader structure with objective attributes and information belief with subjective attributes.As is known to all,the impact of subjective and objective factors of information shocks on the characteristics of financial markets has significant differences.In theoretical research,the joint decision-making of informed traders and uninformed traders forms the equilibrium of the market and affects the characteristics of the financial market.Only considering a single factor will often make the transmission mechanism of information shocks that affect the financial market lose the integrity and objectivity,and may even cause a large deviation between economic theory and actual experience.In order to fully understand the transmission mechanism of information shocks affecting the characteristics of the financial market,we use two indicators to describe the objective trader structure and subjective information beliefs of information shocks in the financial market.The first is the degree of public information,that is,the scope of the spread of private information about the value of assets in the market.Besides,from the perspective of the structure of traders,the degree of public information is the proportion of informed traders with private information among the total traders.Therefore,the degree of public information can be used as a proxy variable for the objective trader structure of the financial market that is affected by information shocks.The second is expectation precision.Uninformed traders who do not have private information about asset value in the market make investment decisions by estimating the information.The accuracy of their estimation of the information is the expectation precision.The information belief obeys a normal distribution,so we can record the inverse of the variance of the belief as the expectation precision.Therefore,the expectation precision can be used as a proxy variable for the subjective information belief of the information shock on the financial market.Based on the unified framework that combines the structure of traders with objective attributes and the information beliefs with subjective attributes,this paper builds the following three models to improve and enrich the theoretical cornerstones of the impact of information shocks on the characteristics of financial markets,and deeply excavate the action mechanism and influence differences between subjective and objective factors.In Chapter 4,empirical research proves that the probability of informed trading(VPIN value)and market sentiment(VIX index)have significant predictive effects on market liquidity measured by bid-ask spread.In detail,the main contents are as follows:Firstly,based on Grossman and Stiglitz’s(1980)noise rational expectation model of perfect competition,we study the impact of traders’ structure with objective attributes and information beliefs with subjective attributes on the liquidity and efficiency of financial markets when the proportion of informed traders and the information beliefs of uninformed traders on the value of risky assets are exogenous.The results show that the increase of the degree of public information has a two-way influence on market liquidity,but it always has a positive effect on market efficiency.The improvement of expectation precision always has a positive effect on both market liquidity and market efficiency effect.In addition,when the degree of information disclosure and the expectation precision are both small,the possibility and degree of the market becoming an inefficient market(excess volatility)will increase significantly.Secondly,based on Kyle’s(1985)perfectly competitive noise rational expected market maker model,we consider the impact of trader structure(proportion of informed traders)and information belief(accuracy of public disclosure)on traders’ trading strategies,market quality and market welfare when regulators require informed traders to publicly disclose their past trading order flow.Specifically,when there is an information shock about the fundamental value of risky assets in financial markets,informed traders submit the order flow of the demand for risk assets according to the observed private information,and market makers speculate the private information of informed traders about the fundamental value of risk assets by observing the publicly disclosed information signals.In order to avoid information leakage induced by the public disclosure required by regulators,informed traders will blur their real demand for risky assets based on private information through randomization of order flows.In addition to public information disclosure,another noteworthy and recently hotly debated empirical implication of our model is high frequency traders of order expectation strategy.In most literatures,high-frequency traders can not only find the past market order flow of informed traders to predict their future path,but also use the waiting time of normal speed traders to obtain trading profits.Therefore,the accuracy of public disclosure can also be regarded as the ability of high frequency market makers to discover the past market order flow of informed traders.The conclusion shows that when the proportion of informed traders is low or the accuracy of public disclosure is low,there is only a mixed strategy equilibrium in the market.On the contrary,there is only a pure strategy equilibrium in the market.In addition,studying the impact of the proportion of informed traders and the accuracy of public information on the characteristics and properties of equilibrium shows that market quality and welfare are not always proportional to the proportion of informed traders and the accuracy of public disclosure.Thirdly,based on the cross-asset market maker model,this paper studies the impact of the trader structure with objective attributes and the information belief with subjective attributes of information shock on the illiquid contagion and market vulnerability of financial markets.Liquidity providers usually learn about the fundamental value of assets from the prices of other assets.This has produced a selfreinforcing positive correlation between price information and liquidity.This relationship will lead to liquidity spillover and is the source of market fragility.A small decline in the liquidity of an asset can lead to a significant decline in the amount of market liquidity and price information through the feedback cycle(liquidity collapse).This feedback cycle provides a new explanation for the liquidity commonality and liquidity dry-ups.Finally,based on the perspective of information shock,we construct informed trading probability(VPIN value)and market sentiment(VIX index)to represent the objective trader structure and subjective trader’s information beliefs of information shock that influence the option market,respectively.Unifying the structure of objective traders and the information beliefs of subjective traders,we study the impact of information shocks on the liquidity of the options market.The results found that both the informed transaction probability(VPIN value)and the market sentiment(VIX index),which is a proxy for market panic,have a significant predictive effect on market liquidity measured by bid-ask spreads,and both have a negative correlation with options market liquidity.To sum up,based on the unified framework that combines the structure of traders with objective attributes and the information beliefs with subjective attributes of information shock,we have described a series of characteristics of how information shocks affect the financial market through theoretical modeling and empirical research.