Abstract
<p class="BodyA">George Akerlof introduced the idea that due to asymmetric information between the buyer and the seller in the lemons market, the market for second-hand vehicles will eventually go on the wane. Parallel to this argument, this essay discusses the extent of problem caused by information asymmetry in the financial market, with the most prominent issues being adverse selection, moral hazard and principal agent problem. Yet, with more regulation from the government and the market, some of these problems can be ameliorated, thus reducing the role that asymmetric information plays in the financial market.</p>
Highlights
Nanqi Zhou1* 1 Tuen Mun, New Territories, Hong Kong * Nanqi Zhou, Tuen Mun, New Territories, Hong Kong
This essay discusses the extent of problem caused by information asymmetry in the financial market, with the most prominent issues being adverse selection, moral hazard and principal agent problem
With more regulation from the government and the market, some of these problems can be ameliorated, reducing the role that asymmetric information plays in the financial market
Summary
Nanqi Zhou1* 1 Tuen Mun, New Territories, Hong Kong * Nanqi Zhou, Tuen Mun, New Territories, Hong Kong. What Role Does Asymmetric Information Play in Financial Markets? This essay discusses the extent of problem caused by information asymmetry in the financial market, with the most prominent issues being adverse selection, moral hazard and principal agent problem.
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