Template-Type: ReDIF-Paper 1.0
Author-Name: Christophe Chamley	
Author-X-Name-First: Christophe
Author-X-Name-Last: Chamley
Author-Email: chamley@bu.edu
Author-Workplace-Name: Institute for Economic Development, Boston University
Title: Complementarities in Information Acquisition with Short-Term Trades 
Abstract: In a financial market where agents trade for prices in the short-term and
where news can increase the uncertainty of the public belief, there are strategic
complementarities in the acquisition of private information and a continuum
of equilibrium strategies if the cost of information is sufficient small. Imperfect
observation of the past prices reduces the continuum of Nash-equilibrium to
a unique one which may be a Strongly Rational-Expectations Equilibrium.
In that equilibrium, because of the strategic complementarity, there are two
sharply different regimes for the evolution of the price, the volume of trade
and the information acquisition which is either nil or at its maximum.
Length: 37 pages
Creation-Date: 2005-07
Revision-Date: 
Publication-Status: 
File-URL:http://www.bu.edu/econ/ied/dp/papers/dp-156chamley.pdf
File-Format: Application/pdf
File-Function: 
Number: dp-156
Classification-JEL: 
Keywords:  financial markets, short-term, endogenous information, multiple
equilibria, social learning, trading frenzies.
Handle: RePEc:bos:iedwpr:dp-156