Investors in a market frequently update their diverse perceptions of the values of risky assets, thus invalidating the classic capital asset pricing model's (CAPM) assumption of complete agreement among investors. To accommodate information asymmetry and belief updating, we have developed an...

This article reviews static and dynamic models of information aggregation in the literature. It highlights the key assumptions these models make, the results they obtain and the issues that still need to be explored to further our understanding of information aggregation in financial markets.

This paper provides a dynamic rational expectations equilibrium model in which investors have heterogeneous information and investment opportunities. Informed investors privately receive advance information about future earnings that is unrelated to current earnings. In response to good advance...

We study rational expectations equilibrium problems and social optimum problems in innite horizon spatial economies in the context of a Ramsey type capital accumulation problem with geographical spillovers. We identify sufficient local and global conditions for the emergence (or not) of optimal...