Dynamic Noisy Rational Expectations Equilibria with Anticipative Information1
نویسندگان
چکیده
This paper studies a dynamic continuous time economy with discrete dividend payment dates and anticipative private information about future dividends. The economy is populated by informed and uninformed investors as well as active unskilled investors. Both competitive and monopolistic informed behaviors are examined. The existence of noisy rational expectations equilibria is demonstrated. Equilibria are derived in closed form and their properties analyzed. Weak-form efficiency is shown to fail. Informed trading is found to reduce price volatility, hence to stabilize the market. Conditions for Pareto efficiency of equilibria with private information are derived.
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