Asymmetric information in financial markets and what does it mean for investors

Asymmetric information in financial markets and what does it mean for investors?
A comparative case study between UK and US markets.

Adverse Selection
Choosing who to give your money is critical in managing risk. You’re likely to lose your money if given to a crook. Likewise, you stand to lose your money if given to someone that does not understand how to manage money. In reality, if you lack information about those looking for fund, it is only prudent to charge an equivalent price for your funds or sale item. Nonetheless, an average cost will make the borrower accept or reject an offer based on the risk factor.
For illustration purposes, we can use the “Market for Lemons” in which two people want to sell of their car. The first champ maybe an old lady that hardly drives her car which is also kept in good condition. The other person is a young champ with a history of crazy driving drag racing and would rarely take the car for service.

Custom Essay: Asymmetric information in financial markets and what does it mean for investors?
A comparative case study between UK and US markets.

By admin in Essays on October 26, 2015