Direct Information Epidemics and Broadcasts: Implications for Asset Prices, Returns, and Volume
34 Pages Posted: 15 May 2014 Last revised: 27 Nov 2014
Date Written: November 25, 2014
This paper extends a growing body of research into the time-series properties of return and trading dynamics caused by direct information flow across investors. Our market setting has the virtue of extreme simplicity including atomistic investors, continuous trading, and a diversified asset market. Regarding direct information epidemics, previous predictions of an "S" curve in prices and non-monotonicity in returns are shown to depend on details of the information event exogenous to the epidemic process itself. Moreover, these patterns can result from other types of information processes. Direct information flow may disrupt the monotonic correspondence between returns and order flow.
Keywords: learning, epidemics, informed trading
JEL Classification: G12, G14
Suggested Citation: Suggested Citation