Essays on asset trading

The overreaching methodology of my Ph.D. thesis is to substitute noise traders with rational traders. I do so by considering liquidity asymmetry between informed trader and uninformed traders. Liquidity asymmetry creates a motive for trade. Under this new setup, I study the impact of asset trade on the real economy, represented by a firm with an investment opportunity, in chapter 1 ("Efficient Asset Trade - A Model with Asymmetric Information and Asymmetric Liquidity Needs"). I find conditions for which asset trade leads to inefficient investment. Chapter 2 ("(In)Efficient Asset Trade and a Rationale for a Tobin Tax") characterizes a tax which can restore efficient investment. In chapter 3, I show that finitely repeated trade, as in Kyle (1985) and Ostrovsky (2012), does not necessarily lead to information revelation if traders are fully rational.