Conformism, Public News and Market Efficiency

Gabriel Desgranges and Celine Rochon

No 2008fe16, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: We study the implications of conformism among analysts in a CARA Gaussian model of the market for a risky asset, where a trader's information is a message sent by an analyst. Conformism increases the weight of the public information in the messages, decreasing their informativeness. More precise public information does not always result in more precise messages. A larger precision of the analysts information does not always make the market more liquid and the price more informative. Conformism creates an overreaction of the price to public information. Using the price as a public signal does not alter the results.

Keywords: Public Information; Asymmetric Information; Conformism; Revelation of Information by Prices; Rational Expectations (search for similar items in EconPapers)
JEL-codes: D82 D84 G14 (search for similar items in EconPapers)
Date: 2008-01-01
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Conformism, Public News and Market Efficiency (2008)
Working Paper: Conformism, Public News and Market Effciency (2008)
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