Larson, Nathan (2011): Clustering on the same news sources in an asset market.
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We study the incentives to acquire information from exclusive news sources versus information from popular sources in a CARA-normal asset market. Each trader is able to observe one of a finite number of news sources. Clustering on the most precise source can happen for two reasons. One is standard: traders do not care that they dilute others’ profits by trading on the same information. The other reason is more novel: traders with different information sets may respond to the same news differently — when this is so, they can benefit by coordinating their attention on the same news source in order to take opposite sides of the market. News from such a source will generate abnormal volume that need not be accompanied by large price movement. Furthermore, we show that as the number of sources grows, traders concentrate their attention on a few of the best ones, leaving most information unexploited.
|Item Type:||MPRA Paper|
|Original Title:||Clustering on the same news sources in an asset market|
|Keywords:||information acquisition; herding; abnormal volume; market order; limit order|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading
G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates
|Depositing User:||Nathan Larson|
|Date Deposited:||15. Aug 2011 20:54|
|Last Modified:||06. May 2015 18:52|
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