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Security Analysis and Trading Patterns When Some Investors Receive Information before Others

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Author Info
Hirshleifer, David
Subrahmanyam, Avanidhar
Titman, Sheridan

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Abstract

In existing models of information acquisition, all informed investors receive their information at the same time. This article analyzes trading behavior and equilibrium information acquisition when some investors receive common private information before others. The model implies that, under some conditions, investors will focus only on a subset of securities ('herding'), while neglecting other securities with identical exogenous characteristics. In addition, the model is consistent with empirical correlations that are suggestive of oft-cited trading strategies such as profit taking (short-term position reversal) and following the leader (mimicking earlier trades). Copyright 1994 by American Finance Association.

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File URL: http://links.jstor.org/sici?sici=0022-1082%28199412%2949%3A5%3C1665%3ASAATPW%3E2.0.CO%3B2-9&origin=repec
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Publisher Info
Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 49 (1994)
Issue (Month): 5 (December)
Pages: 1665-98
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Handle: RePEc:bla:jfinan:v:49:y:1994:i:5:p:1665-98

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  1. Alexander Gumbel, 1999. "Trading on Short-Term Information," OFRC Working Papers Series 1999fe10, Oxford Financial Research Centre. [Downloadable!]
  2. Amil Dasgupta & Andrea Prat & Michela Verardo, 2005. "The Price of Conformism," Levine's Bibliography 784828000000000357, UCLA Department of Economics. [Downloadable!]
  3. Terrance Odean, 1998. "Volume, Volatility, Price and Profit When All Traders Are Above Average," Finance 9803001, EconWPA. [Downloadable!]
  4. Craig Holden & Avanidhar Subrahmanyam, 1998. "New Events, Information Acquisition, and Serial Correlation," University of California at Los Angeles, Anderson Graduate School of Management 1115, Anderson Graduate School of Management, UCLA. [Downloadable!]
  5. David Goldbaum, 2003. "Coordinated Investing with Feedback and Learning," Computing in Economics and Finance 2003 213, Society for Computational Economics. [Downloadable!]
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  6. Dennis P J Botman & Cees G H Diks, 2002. "Location of Investors and Capital Flight," Tinbergen Institute Discussion Papers 02-013/1, Tinbergen Institute. [Downloadable!]
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  7. Yi-Tsung Lee & Yu-Jane Liu & Richard Roll & Avanidhar Subrahmanyam, 2001. "Order Imbalances and Market Efficiency: Evidence from the Taiwan Stock Exchange, Forthcoming in the Journal of Financial and Quantitative Analysis," University of California at Los Angeles, Anderson Graduate School of Management 1021, Anderson Graduate School of Management, UCLA. [Downloadable!]
  8. Hirshleifer, David & Teoh, Siew Hong, 2008. "Thought and Behavior Contagion in Capital Markets," MPRA Paper 9164, University Library of Munich, Germany. [Downloadable!]
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  9. John C. Persons & Vincent A. Warther, . "Boom and Bust Patterns in the Adoption of Financial Innovations," Research in Financial Economics 9601, Ohio State University. [Downloadable!]
  10. Matthew Spiegel, 1996. "Stock Price Volatility in a Multiple Security Overlapping Generations Model," Finance 9608002, EconWPA. [Downloadable!]
  11. Tarun Chordia & Asani Sarkar & Avanidhar Subrahmanyam, 2005. "The joint dynamics of liquidity, returns, and volatility across small and large firms," Staff Reports 207, Federal Reserve Bank of New York. [Downloadable!]
  12. Beckmann, Daniela & Menkhoff, Lukas & Suto, Megumi, 2007. "Does Culture Influence Asset Managers? Views and Behavior?," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-367, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
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  13. Tarun Chordia & Richard Roll & Avanidhar Subrahmanyam, 2001. "Evidence on the Speed of Convergence to Market Efficiency," University of California at Los Angeles, Anderson Graduate School of Management 1012, Anderson Graduate School of Management, UCLA. [Downloadable!]
  14. Ryuichi Nakagawa & Hirofumi Uchida, 2004. "Herd Behavior in the Japanese Loan Market: Evidence from Bank Panel Data," Econometric Society 2004 Australasian Meetings 161, Econometric Society. [Downloadable!]
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  15. Lillyn L. Teh & Werner F.M. de Bondt, 1997. "Herding Behavior and Stock Returns: An Exploratory Investigation," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 133(II), pages 293-324, June. [Downloadable!]
  16. Daniel, Kent & Hirshleifer, David & Subrahmanyam, Avanidhar, 2005. "Investor Psychology and Tests of Factor Pricing Models," Working Paper Series 2005-26, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  17. Dennis P. J. Botman & Cees G. H. Diks, 2005. "The Role of Domestic and Foreign Investors in a Simple Model of Speculative Attacks," IMF Working Papers 05/205, International Monetary Fund. [Downloadable!]
  18. Hirshleifer, David & Subrahmanyam, Avanidhar & Titman, Sheridan, 2004. "Feedback and the Success of Irrational Investors," Working Paper Series 2004-8, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
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  19. Bruce Tuckman & Jean-Luc Vila, 1993. "Holding Costs and Equilibrium Arbitrage," University of California at Los Angeles, Anderson Graduate School of Management 1153, Anderson Graduate School of Management, UCLA. [Downloadable!]
  20. Adam Clements & Michael E. Drew, 2007. "Institutional Homogeneity and Choice in Superannuation," School of Economics and Finance Discussion Papers and Working Papers Series 218, School of Economics and Finance, Queensland University of Technology. [Downloadable!]
  21. William N. Goetzmann & Massimo Massa, 2000. "Daily Momentum and Contrarian Behavior of Index Fund Investors," NBER Working Papers 7567, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  22. Terrance Odean., 1996. "Volume, Volatility, Price and Profit When All Trader Are Above Average," Research Program in Finance Working Papers RPF-266, University of California at Berkeley. [Downloadable!]
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