The more we know on the fundamental, the less we agree on the price
I allow heterogenity in trading horizons across groups in a standard differential information model of a financial market. This can explain the empirical facts that after public announcements trading volume increases, more private information is incorporated into prices and volatility increases. Public information, in such environments, has the important secondary role of helping agents to learn about the information of other agents. As a consequence, whenever the correlation between private information across groups is sufficiently low, a public announcement increases disagreement among short horizon traders on the expected selling price, even if it decreases disagreement about the fundamental value of the asset. Additional testable implications are also suggested.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Jun 2011|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wahal, Sunil & McConnell, John J., 2000. "Do institutional investors exacerbate managerial myopia?," Journal of Corporate Finance, Elsevier, vol. 6(3), pages 307-329, September.
- Stephen Morris, "undated".
""Speculative Investor Behavior and Learning'',"
CARESS Working Papres
95-13, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- Iván Werning & George-Marios Angeletos, 2006.
"Crises and Prices: Information Aggregation, Multiplicity, and Volatility,"
American Economic Review,
American Economic Association, vol. 96(5), pages 1720-1736, December.
- Ivan Werning & George-Marios Angeletos, 2005. "Crises and Prices: Information Aggregation, Multiplicity and Volatility," 2005 Meeting Papers 284, Society for Economic Dynamics.
- George-Marios Angeletos & Ivan Werning, 2004. "Crises and Prices: Information Aggregation, Multiplicity and Volatility," NBER Working Papers 11015, National Bureau of Economic Research, Inc.
- Biais, Bruno & Bossaerts, Peter & Spatt, Chester, 2009.
"Equilibrium Asset Pricing and Portofolio Choice Under Asymmetric Information,"
IDEI Working Papers
474, Institut d'Économie Industrielle (IDEI), Toulouse.
- Bruno Biais & Peter Bossaerts & Chester Spatt, 2010. "Equilibrium Asset Pricing and Portfolio Choice Under Asymmetric Information," Review of Financial Studies, Society for Financial Studies, vol. 23(4), pages 1503-1543, April.
- Biais, Bruno & Bossaerts, Peter & Spatt, Chester, 2009. "Equilibrium Asset Pricing and Portofolio Choice Under Asymmetric Information," TSE Working Papers 09-018, Toulouse School of Economics (TSE).
- Christian Hellwig & Arijit Mukherji & Aleh Tsyvinski, 2005.
"Self-Fulfilling Currency Crises: The Role of Interest Rates,"
NBER Working Papers
11191, National Bureau of Economic Research, Inc.
- Aleh Tsyvinski & Arijit Mukherji & Christian Hellwig, 2006. "Self-Fulfilling Currency Crises: The Role of Interest Rates," American Economic Review, American Economic Association, vol. 96(5), pages 1769-1787, December.
- Bailey, Warren & Karolyi, G. Andrew & Salva, Carolina, 2004.
"The Economic Consequences of Increased Disclosure:Evidence from International Cross-Listings,"
Working Paper Series
2004-7, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- Bailey, Warren & Andrew Karolyi, G. & Salva, Carolina, 2006. "The economic consequences of increased disclosure: Evidence from international cross-listings," Journal of Financial Economics, Elsevier, vol. 81(1), pages 175-213, July.
- Xuemin (Sterling) Yan & Zhe Zhang, 2009. "Institutional Investors and Equity Returns: Are Short-term Institutions Better Informed?," Review of Financial Studies, Society for Financial Studies, vol. 22(2), pages 893-924, February.
- Ryan Love & Richard Payne, 2003.
"Macroeconomic news, order flows and exchange rates,"
LSE Research Online Documents on Economics
24901, London School of Economics and Political Science, LSE Library.
- Love, Ryan & Payne, Richard, 2008. "Macroeconomic News, Order Flows, and Exchange Rates," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 43(02), pages 467-488, June.
- Richard Payne, 2003. "Macroeconomic news, order flows and exchange rates," FMG Discussion Papers dp475, Financial Markets Group.
- Diamond, Douglas W. & Verrecchia, Robert E., 1981. "Information aggregation in a noisy rational expectations economy," Journal of Financial Economics, Elsevier, vol. 9(3), pages 221-235, September.
- Rosenthal, Leonard & Young, Colin, 1990. "The seemingly anomalous price behavior of Royal Dutch/Shell and Unilever N.V./PLC," Journal of Financial Economics, Elsevier, vol. 26(1), pages 123-141, July.
- Vives, Xavier, 1995.
"Short-Term Investment and the Informational Efficiency of the Market,"
Review of Financial Studies,
Society for Financial Studies, vol. 8(1), pages 125-160.
- Xavier Vives, 1994. "Short-term Investment and the Informational Efficiency of the Market," CEPR Financial Markets Paper 0034, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ..
- Vives, X., 1993. "Short-Term Investment and the Informational Efficiency of the Market," UFAE and IAE Working Papers 207.93, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Jose A. Scheinkman & Wei Xiong, 2003. "Overconfidence and Speculative Bubbles," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1183-1219, December.
- Christian Hellwig, 2002. "Public Announcements, Adjustment Delays, and the Business Cycle (November 2002)," UCLA Economics Online Papers 208, UCLA Department of Economics.
- Milgrom, Paul & Stokey, Nancy, 1982.
"Information, trade and common knowledge,"
Journal of Economic Theory,
Elsevier, vol. 26(1), pages 17-27, February.
- Manuel S. Santos & Michael Woodford, 1993.
"Rational Asset Pricing Bubbles,"
9304, Centro de Investigacion Economica, ITAM.
- Snehal Banerjee & Ilan Kremer, 2010. "Disagreement and Learning: Dynamic Patterns of Trade," Journal of Finance, American Finance Association, vol. 65(4), pages 1269-1302, 08.
- Gaspar, Jose-Miguel & Massa, Massimo & Matos, Pedro, 2005. "Shareholder investment horizons and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 76(1), pages 135-165, April.
- Edith S. Hotchkiss & Deon Strickland, 2003. "Does Shareholder Composition Matter? Evidence from the Market Reaction to Corporate Earnings Announcements," Journal of Finance, American Finance Association, vol. 58(4), pages 1469-1498, 08.
- Bin Ke & Kathy Petroni, 2004. "How Informed Are Actively Trading Institutional Investors? Evidence from Their Trading Behavior before a Break in a String of Consecutive Earnings Increases," Journal of Accounting Research, Wiley Blackwell, vol. 42(5), pages 895-927, December.
- Xavier Vives, 2007. "Information and Learning in Markets," Levine's Bibliography 122247000000001520, UCLA Department of Economics.
- Bruno Biais & Peter Bossaerts, 1998. "Asset Prices and Trading Volume in a Beauty Contest," Review of Economic Studies, Oxford University Press, vol. 65(2), pages 307-340.
- J. Michael Harrison & David M. Kreps, 1978. "Speculative Investor Behavior in a Stock Market with Heterogeneous Expectations," The Quarterly Journal of Economics, Oxford University Press, vol. 92(2), pages 323-336.
- Goldstein, Itay & Ozdenoren, Emre & Yuan, Kathy, 2010.
"Learning and Complementarities: Implications for Speculative Attacks,"
CEPR Discussion Papers
7651, C.E.P.R. Discussion Papers.
- Kathy Yuan & Emre Ozdenoren & Itay Goldstein, 2008. "Learning and Complementarities: Implications for Speculative Attacks," 2008 Meeting Papers 276, Society for Economic Dynamics.
- Daron Acemoglu & Victor Chernozhukov & Muhamet Yildiz, 2009.
"Fragility of Asymptotic Agreement under Bayesian Learning,"
Levine's Working Paper Archive
814577000000000139, David K. Levine.
- Yildiz, Muhamet & Acemoglu, Daron & Chernozhukov, Victor, 2016. "Fragility of asymptotic agreement under Bayesian learning," Theoretical Economics, Econometric Society, vol. 11(1), January.
- Hellwig, Martin F., 1980. "On the aggregation of information in competitive markets," Journal of Economic Theory, Elsevier, vol. 22(3), pages 477-498, June.
- T. Clifton Green, 2004. "Economic News and the Impact of Trading on Bond Prices," Journal of Finance, American Finance Association, vol. 59(3), pages 1201-1234, 06.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:8455. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.