Journal of Financial Economics Vol. 9 No. 3 1981
Information aggregation in a noisy rational expectations economy
Abstract
This paper analyzes a general equilibrium model of a competitive security market in which traders possess independent pieces of information about the return of a risky asset. Each trader conditions his estimate of the return both on his own private source of information and price, which in equilibrium serves as a ‘noisy’ aggregator of the total information observed by all traders. A closed-form characterization of the rational expectations equilibrium is presented. A counter-example to the existence of ‘fully revealing’ equilibrium is developed.
- DOI
- 10.1016/0304-405x(81)90026-x
- Volume
- 9
- Issue
- 3
- Pages
- 221-235
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref