On the Relation between Private Information and Non-Fundamental Volatility

Myungkyu Shim and Song Doyoung ()
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Song Doyoung: School of Economics, Yonsei University, Seoul, South Korea

The B.E. Journal of Theoretical Economics, 2023, vol. 23, issue 2, 809-821

Abstract: It is a well-established property that more precise private information leads to lower non-fundamental volatility in a coordination economy with dispersed information. In this note, we identify conditions under which such an argument holds or does not hold. In particular, we show that the opposite relationship holds when (1) there is a strong positive correlation between private information of different agents and (2) public information is endogenously generated.

Keywords: coordination game; financial prices; non-fundamental volatility; dispersed information (search for similar items in EconPapers)
JEL-codes: D80 D83 G10 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1515/bejte-2021-0166

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