Kyle's Law

Kyle's Law, formulated by economist Albert Kyle, describes how information impacts financial markets, particularly in trading. It suggests that the presence of informed traders (those who have knowledge about asset values) influences market prices, as they can act on their information before others. The law highlights the role of liquidity in markets—the easier it is to buy and sell assets, the more efficient the market becomes at reflecting true asset values. In essence, Kyle's Law helps explain how information asymmetry among traders can affect market dynamics and pricing.