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Differential Information and Dynamic Behavior of Stock Trading Volume

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  • Hua He
  • Jiang Wang

Abstract

This paper develops a multi-period rational expectations model of stock trading in which investors have differential information concerning the underlying value of the stock. Investors trade competitively in the stock market based on their private information and the information revealed by the market-clearing prices, as well as other public news. We examine how trading volume is related to the information flow in the market and how investors' trading reveals their private information.

Suggested Citation

  • Hua He & Jiang Wang, 1995. "Differential Information and Dynamic Behavior of Stock Trading Volume," NBER Working Papers 5010, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5010
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