hard · Principles of Finance
Which of the following is a key characteristic of the 'Kyle Model' of informed trading in market microstructure?
- Informed traders execute their entire order immediately to capture the information advantage.
- The price impact of a trade (Kyle's Lambda) increases with the degree of information asymmetry.
- Increased volume from 'noise traders' makes the market less liquid.
- The bid-ask spread is determined entirely by the fixed costs of the exchange.
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