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Security Valuation: Information Asymmetry

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Can you discuss with me in regards to information asymmetry, explain how different buyers and sellers in the securities market can have different information about particular securities that would cause them to value them differently.

Also, can you suggest any peer reviewed articles that I can review in addtion to your response?

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Solution Summary

This solution explains the reasons for information asymmetry in valuing securities. The sources used are also included in the solution.

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Step 1
Different buyer and seller in the securities market can have different information about particular securities that would cause them to value them differently. One main reason is that different buyers and sellers have different sources of information. Different media houses provide different information about securities. News channels have different sources and the opinions expressed by them differ. Further, there are informal sources of information which include the social media. What makes different buyers and sellers have different information is because their sources of information are different.

Step 2
Another reason for information asymmetry in the securities market is that the time at which information is received differs. One news ...

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