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Information Acquisition in Financial Markets

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Author Info
Barlevy, Gadi
Veronesi, Pietro

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Abstract

Previous work on information and financial markets has focused on a special set of assumptions: agents have exponential utility, and random variables are normally distributed. These assumptions are often necessary to obtain closed-form solutions. We present an example with alternative assumptions, and demonstrate that some of the conclusions from previous literature fail to hold. In particular, we show that in our example, as more agents acquire information, prices do not necessarily become more informative, and agents may have greater incentive to acquire information. Learning can therefore be a strategic complement, allowing for the possibility of multiple equilibria. Copyright 2000 by The Review of Economic Studies Limited

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Publisher Info
Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 67 (2000)
Issue (Month): 1 (January)
Pages: 79-90
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Handle: RePEc:bla:restud:v:67:y:2000:i:1:p:79-90

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  1. Luigi Guiso & Tullio Jappelli, 2007. "Information Acquisition and Portfolio Performance," Economics Working Papers ECO2007/45, European University Institute. [Downloadable!]
    Other versions:
  2. Marc Andreas Muendler, 2004. "The Existence of Informationally Efficient Markets When Individuals Are Rational," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  3. Dirk Bergemann & Juuso Välimäki & Xianwen Shi, 2007. "Information Acquisition in Interdependent Value Auctions," Levine's Bibliography 843644000000000320, UCLA Department of Economics. [Downloadable!]
    Other versions:
  4. Gadi Barlevy & Pietro Veronesi, 1999. "On the Possibility of Stock Market Crashes in the Absence of Portfolio Insurance," Discussion Papers 1252, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  5. Laura Veldkamp & Christian Hellwig, 2006. "Knowing What Others Know: Coordination Motives in Information Acquisition," Working Papers 06-14, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
    Other versions:
  6. Marc-Andreas Muendler, 2005. "Risk Neutral Investors Do Not Acquire Information¤," University of California at San Diego, Economics Working Paper Series 2005-10, Department of Economics, UC San Diego. [Downloadable!]
  7. Marc Andreas Mündler, 2005. "Rational Information Choice in Financial Market Equilibrium," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  8. Diego Garcia & Francesco Sangiorgi & Branko Urosevic, 2004. "Overconfidence and Market Efficiency with Heterogeneous Agents," Economics Working Papers 786, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  9. Duane Rockerbie & Stephen Easton, 2003. "Information as a Substitute for Bailouts in Sovereign Debt Markets," International Finance 0303003, EconWPA. [Downloadable!]
  10. Gadi Barlevy & Pietro Veronesi, 2007. "Information acquisition in financial markets: a correction," Working Paper Series WP-07-06, Federal Reserve Bank of Chicago. [Downloadable!]
  11. Christian Hellwig, 2005. "Knowing What Others Know: Coordination Motives in Information Acquisition (March 2007, with Laura Veldkamp)," UCLA Economics Online Papers 369, UCLA Department of Economics. [Downloadable!]
  12. Laura L. Veldkamp, 2006. "Media Frenzies in Markets for Financial Information," American Economic Review, American Economic Association, vol. 96(3), pages 577-601, June.
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  13. Stijn Van Nieuwerburgh & Laura Veldkamp, 2008. "Information Acquisition and Under-Diversification," NBER Working Papers 13904, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Christophe Chamley, 2005. "Complementarities in Information Acquisition with Short-Term Trades," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-156, Boston University - Department of Economics. [Downloadable!]
  15. Juan Dubra & Helios Herrera, 2002. "Market Participation, Information and Volatility," Working Papers 0206, Centro de Investigacion Economica, ITAM. [Downloadable!]
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