We saw in Chapter 4 that in a statistical study of stock market data, Barclay and Warner (1993) found that very small trades and the very large trades did not have a significant impact on stock prices. They found that medium-sized trades had the greatest impact on the security process.

a. Describe how this empirical finding might be consistent with the theoretical results of Kyle (1985).

b. Describe how this empirical finding might be inconsistent with the theoretical results of Kyle (1985).

c.  Financial blogging has substantially increased the flow of information to investors who would otherwise be uninformed, decreasing investor asymmetries. Would related improvements in the flow of information tend to increase or decrease Kyle’s lambda?