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On the Relation between Private Information and Non-Fundamental Volatility

Author

Listed:
  • Shim Myungkyu
  • Song Doyoung

    (School of Economics, Yonsei University, Seoul, South Korea)

Abstract

It is a well-established property that more precise private information leads to lower non-fundamental volatility in a coordination economy with dispersed information. In this note, we identify conditions under which such an argument holds or does not hold. In particular, we show that the opposite relationship holds when (1) there is a strong positive correlation between private information of different agents and (2) public information is endogenously generated.

Suggested Citation

  • Shim Myungkyu & Song Doyoung, 2023. "On the Relation between Private Information and Non-Fundamental Volatility," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 23(2), pages 809-821, June.
    • Handle: RePEc:bpj:bejtec:v:23:y:2023:i:2:p:809-821:n:10
    DOI: 10.1515/bejte-2021-0166
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    More about this item

    Keywords

    coordination game; financial prices; non-fundamental volatility; dispersed information;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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