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Content archived on 2024-06-18

Informational Frictions in Financial Markets

Objective

My research studies the impact of informational frictions on financial markets. In a frictionless market all economic agents have the same access to information. However, such homogeneity is often violated either because some agents have more information or they can better process it. A source of such informational advantage could be superior ability or financial skills. Naturally such skills are likely to be concentrated among institutional investors. But academic research shows that institutional investors do not generate better outcomes. My research argues that a subset of actively managed mutual fund managers can outperform passive benchmarks, and other investors, because they can choose better stocks or better time the changes in aggregate market conditions. These differences in investment skills have permanent effects on the ex-post performance of these investors. Identifying skilled investors undermines the postulates of efficient markets and provides useful tool for households to make efficient financial decisions. Another source of friction could be institutional differences fostering incentives to acquire and process information. For example I show that the degree of centralization or business concerns inside organizations affect incentives to acquire information and take excessive risk. Informational frictions can also result from the illegal acquisition of inside information. In my current work I want to understand the role of illegal insider trading for price formation and the overall quality of information in financial markets. On a broader level I study the implications of informational frictions for the growing income inequality between rich and poor. To explain why the inequality grows I show that some agents are endowed with more resources to access beneficial information and thus can enhance their capital gains and total income. Overall, my primary aim is to understand the role informational frictions play in both micro and macroeconomic arenas.

Fields of science (EuroSciVoc)

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Topic(s)

Calls for proposals are divided into topics. A topic defines a specific subject or area for which applicants can submit proposals. The description of a topic comprises its specific scope and the expected impact of the funded project.

Call for proposal

Procedure for inviting applicants to submit project proposals, with the aim of receiving EU funding.

FP7-PEOPLE-2013-CIG
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Funding Scheme

Funding scheme (or “Type of Action”) inside a programme with common features. It specifies: the scope of what is funded; the reimbursement rate; specific evaluation criteria to qualify for funding; and the use of simplified forms of costs like lump sums.

MC-CIG - Support for training and career development of researcher (CIG)

Coordinator

IMPERIAL COLLEGE OF SCIENCE TECHNOLOGY AND MEDICINE
EU contribution
€ 100 000,00
Address
SOUTH KENSINGTON CAMPUS EXHIBITION ROAD
SW7 2AZ London
United Kingdom

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Region
London Inner London — West Westminster
Activity type
Higher or Secondary Education Establishments
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Total cost

The total costs incurred by this organisation to participate in the project, including direct and indirect costs. This amount is a subset of the overall project budget.

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