Shrinking information asymmetry in financial transactions
Information is power in financial markets. However, almost all economic transactions involve some degree of information failure, also known as information asymmetry. This is when not all parties involved in an economic transaction possess the same amount of knowledge. While this is not a new concept for economics, little is known about the actual economic conditions that may foster such information asymmetries. The EU-funded INFOMAK project will fill this knowledge gap. It will develop macroeconomic frameworks in which the degree of information asymmetries and the quality of assets are endogenously determined by agents’ decisions to trade in opaque markets or produce complex financial products. In the end, the project will identify the drivers of asset quality and complexity.
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