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Complementarities in information acquisition with short-term trades

  • Christophe Chamley

    ()

    (Department of Economics, Boston University)

Registered author(s):

    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 sufficient small, a continuum of equilibrium strategies. Imperfect observation of past prices reduces the continuum of Nash-equilibrium 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 the information acquisition.

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    Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2006-042.

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    Length: 29 pages
    Date of creation: Jul 2006
    Date of revision:
    Handle: RePEc:bos:wpaper:wp2006-042
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