Complementarities in Information Acquisition with Short-Term Trades

Christophe Chamley ()
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Christophe Chamley: PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, BU - Boston University [Boston], PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: This item is a preserved copy. In a financial market where agents trade for short-term profit and where news can increase the uncertainty of the public belief, there are strategic complementarities in the acquisition of private information and, if the cost of information is sufficiently small, a continuum of equilibrium strategies. Imperfect observation of past prices reduces the continuum of Nash equilibria to a Strongly Rational-Expectations Equilibrium. In that equilibrium, there are two sharply different regimes for the evolution of the price, the volume of trade, and information acquisit

Keywords: Endogenous information; Short-term gain; Microstructure; Strategic complementarity; Multiple equilibria; Strongly Rational-Expectations Equilibrium; Trading frenzies (search for similar items in EconPapers)
Date: 2007-12
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Citations: View citations in EconPapers (14)

Published in Theoretical Economics, 2007, 2 (4), pp.441-467

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00754190

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