Equilibrium price with institutional investors and with naive traders
This paper uses a competitive equilibrium model to study how institutional investors influence the volatility and the informativeness of asset prices. Institutional investors are assumed to be "rational" informed traders, while individual investors are supposed to be "naive" informed traders, insofar as the former use the equilibrium price to extract information while the latter do not. The paper compares the informativeness and the volatility of the equilibrium price in an economy in which the informed traders are naive and in one where they are rational; the paper also investigates how the price characteristics react to changes in the parameters, in particular in the number of informed traders.
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- De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990.
"Noise Trader Risk in Financial Markets,"
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- J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, . "Noise Trader Risk in Financial Markets," J. Bradford De Long's Working Papers _124, University of California at Berkeley, Economics Department.
- De Long, J. Bradford & Shleifer, Andrei & Summers, Lawrence H. & Waldmann, Robert J., 1990. "Noise Trader Risk in Financial Markets," Scholarly Articles 3725552, Harvard University Department of Economics.
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- Arthur B. Kennickell & Martha Starr-McCluer & Annika E. Sunden, 1997. "Family finances in the U.S.: recent evidence from the Survey of Consumer Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jan, pages 1-24.
- Milgrom, Paul & Stokey, Nancy, 1982.
"Information, trade and common knowledge,"
Journal of Economic Theory,
Elsevier, vol. 26(1), pages 17-27, February.
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"Trading Volume and Asset Liquidity,"
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142, C.E.P.R. Discussion Papers.
- Benjamin M. Friedman, 1995. "Economic Implications of Changing Share Ownership," NBER Working Papers 5141, National Bureau of Economic Research, Inc.
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