Chamley, Christophe () (Paris-Jourdan Sciences Economiques and Boston University)
Abstract
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 acquisition.
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Article provided by Society for Economic Theory in its journal Theoretical Economics.
Volume (Year): 2 (2007) Issue (Month): 4 (December) Pages: 441-467 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
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