Conformism, Public News and Market Effciency

Gabriel Desgranges and Celine Rochon

OFRC Working Papers Series from Oxford Financial Research Centre

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 in- formation is a message sent by an analyst. Conformism increases the weight of the public information in the messages, decreasing their in- formativeness. More precise public information does not always result in more precise messages. A larger precision of the analysts informa- tion does not always make the market more liquid and the price more informative. Conformism creates an overreaction of the price to pub- lic 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)
Pages: 43
Date: 2008
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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 Efficiency (2008)
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