Differential Information and Dynamic Behavior of Stock Trading Volume
58 Pages Posted: 7 Aug 2000 Last revised: 11 Sep 2022
Date Written: February 1995
This paper develops a multi-period rational expectations model of stock trading in which investors have differential information concerning the underlying value of the stock. Investors trade competitively in the stock market based on their private information and the information revealed by the market-clearing prices, as well as other public news. We examine how trading volume is related to the information flow in the market and how investors' trading reveals their private information.
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