The effects of public information with asymmetrically informed short-horizon investors
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Topic: | The effects of public information with asymmetrically informed short-horizon investors | |
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Time: | Friday , 2012-05-04 12:00-08:00 | |
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Speaker: | , | |
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Affiliations: | Duke University | |
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Topic:
The effects of public information with asymmetrically informed short-horizon investors
Time:
星期四,2012-05-04 10:30-12:00
Venue:
Room 505, Datong Building West Huaihai Road 211, SAIF
Speaker:
Qi Chen
The effects of public information with asymmetrically informed short-horizon investors
This paper analyzes the effects of public information in a perfect competition trading model populated by asymmetrically informed short-horizon investors who have differing private information precisions. We first show that information asymmetry reduces the amount of private information revealed by price in equilibrium (i.e., price informativess) and can lead to multiple linear equilibria. We then demonstrate that the presence of both information asymmetry and short horizons provides a channel through which public information influences price informativeness and equilibrium uniqueness. Specifically, public information improves price informativeness only when it is of high quality (precision). When the quality of public information is low, multiple equilibria can arise and increasing public information precision reduces price informativness.
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