We then characterize analytically and numerically how the characteristics of private information—its quantity, persistence and correlation, and division among speculators—affect trading profits, pricing and trading strategies. In particular, we derive how speculators trade on new information versus old, and on private signals versus prices. We show via a frequency-domain argument that trading strategies emphasize new information versus old.
|Date of creation:||2008|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
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