This paper argues that a guru possessing a multi-dimensional informational advantage may want to truthfully report her opinion to the media to learn more out of the actions of other, sometimes better-informed traders.

This work presents a theoretical and empirical evaluation of the role of market belief in the structure of risk premia. Our main result is that fluctuations in market belief are large contributors to the time variability of risk premia. On average, the risk premium on holding Federal Funds...

We extend Kyle's (1985) model of insider trading to the case where liquidity provided by noise traders follows a general stochastic process. Even though the level of noise trading volatility is observable, in equilibrium, measured price impact is stochastic. If noise trading volatility is...

In parimutuel betting markets, it has been observed that proportionally too many bets are placed on longshots, late bets are more informative than early bets, and a sizeable fraction of bets are placed early. We propose an explanation for these facts based on equilibrium incentives of privately...

The close relationship between commodity future and cash prices is critical for the effectiveness of risk management and the functioning of price discovery. However, in recent years, commodity futures prices, across the board, have appeared increasingly detached from prices on physical markets....

We examine the role that spot markets and physical inventories play in revealing to uninformed traders the expectations of informed traders. Although many papers investigate potential mechanisms by which futures markets may disseminate such information, the role of spot markets has not been...

We use the theory of learning in games to show that no-trade results do not require that gains from trade are common knowledge nor that play is a Nash Equilibrium.

We review theory and evidence relating to herd behaviour, payoff and reputational interactions, social learning, and informational cascades in capital markets. We offer a simple taxonomy of effects, and evaluate how alternative theories may help explain evidence on the behavior of investors,...

We analyze how financial experts influence asset prices in a sequential trading model. In the model, an expert of unknown ability sends a report about asset values to traders, who then observe a signal about the expert's type. All information about the expert's ability is private to traders and...

Do asset prices aggregate investors’ private information about the ability of financial analysts? We show that as financial analysts become reputable, the market can get trapped: Investors optimally choose to ignore their private information, and blindly follow analyst recommendations. As time...