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Dr Jekyll and Mr Hyde: Feedback and Welfare When Hedgers Can Acquire Information

Jacques Olivier

Journal of Financial and Quantitative Analysis2026https://doi.org/10.1017/s0022109026102671article
FT50AJG 4ABDC A*
Weight
0.50

Abstract

I ask whether hedgers who speculate should be regulated differently from other speculators in a model where information acquisition is endogenous, and information has real effects. Hedging benefits and feedback effects generate strategic complementarities between market-maker, firm manager, and trader, which causes multiple equilibria. Gains from trade are lower when hedgers acquire information, while speculators may produce less information than socially desirable. A “Volcker rule” separating hedging and speculative activities may help select the higher welfare equilibrium. When too little information is produced, contracts whereby a firm subsidizes losses of designated market-makers (DMM) to make prices more informative increase welfare.

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https://doi.org/https://doi.org/10.1017/s0022109026102671

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@article{jacques2026,
  title        = {{Dr Jekyll and Mr Hyde: Feedback and Welfare When Hedgers Can Acquire Information}},
  author       = {Jacques Olivier},
  journal      = {Journal of Financial and Quantitative Analysis},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1017/s0022109026102671},
}

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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