Information Asymmetry in Security Trade

Information Asymmetry in Security Trade
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Information Asymmetry in Security Trade
Financial markets are usually regarded to have asymmetric information, where the parties involved have more information about the asset under consideration when compared to the other party. In this regard, one of the parties makes a more informed decision compared to the other one. It is a unique situation that is illustrated by the existence of imperfect knowledge. This is usually seen when one of the parties in a deal has information that differs from the one possessed by the other party (Crawford, Pavanini, & Schivardi, 2018).
The aspect is called the division of knowledge or specialization and is applied in the trade of assets, securities, and other goods. With such a division of knowledge, one party has more advantages over the other. It is not a bad thing to have asymmetric information about a product. One of the distinguishing features of a healthy market is having asymmetric information. The existence of differences regarding how the buyer or seller ...