The information content of stock prices is analysed without imposing strong restrictions on traders' preferences and the distribution of dividends. Noise in the information contained in equilibrium prices arises from endogenous asset supply, which offsets price movements due to informed trading....

We study a general static noisy rational expectations model, where investors have private information about asset payoffs, with common and private components, and about their own exposure to an aggregate risk factor, and derive conditions for existence and uniqueness (or multiplicity) of...

The goal of this paper is to study how informational frictions affect asset liquidity in OTC markets in a laboratory setting. The experiments replicate an OTC market similar to the one used in monetary and financial economics (Shi, 1995; Trejos and Wright, 1995; Duffie, Garleanu, and Pedersen, 2005):...

We examine the role of earnings management in explaining the properties of asset prices and stock market participation. We demonstrate that investors' uncertainty about the extent of manipulation can cause excess movements in stock price relative to fluctuations in output. When faced with...

The paper contrasts theories that explain diverse belief by asymmetric private information (in short PI) with theories which postulate agents use subjective heterogenous beliefs (in short HB). We focus on problems where agents forecast aggregates such as profit rate of the Samp;P500 and our...

How effectively does a decentralized marketplace aggregate information that is dispersed throughout the economy? We study this question in a dynamic setting where sellers have private information that is correlated with an unobservable aggregate state. In any equilibrium, each seller's trading...

We analyze a model in which information may be voluntarily disclosed by a firm and/or by a third party, e.g., financial analysts. Due to its strategic nature, corporate voluntary disclosure is qualitatively different from third-party disclosure. Greater analyst coverage crowds out (crowds in)...

We propose and estimate a model of endogenous informed trading that is a hybrid of the PIN and Kyle models. When an informed trader trades optimally, both returns and order flows are needed to identify information asymmetry parameters. Empirical relationships between parameter estimates and...

This paper performs a welfare analysis of markets with private information in which agents can condition on noisy prices in the rational expectations tradition. Price-contingent strategies introduce two externalities in the use of private information: a payoff (pecuniary) externality related to...

We study information acquisition in dealer markets. We first identify a one-sided strategic complementarity in information acquisition: the more informed traders are, the larger market makers' gain from becoming informed. When quotes are observable, this effect in turn induces a strategic...