Direct Information Epidemics and Broadcasts: Implications for Asset Prices, Returns, and Volume

34 Pages Posted: 15 May 2014 Last revised: 27 Nov 2014

See all articles by Ravi Sastry

Ravi Sastry

University of Melbourne - Department of Finance

James L. Smith

affiliation not provided to SSRN

Rex Thompson

affiliation not provided to SSRN

Date Written: November 25, 2014

Abstract

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

Sastry, Ravi and Smith, James L. and Thompson, Rex W., Direct Information Epidemics and Broadcasts: Implications for Asset Prices, Returns, and Volume (November 25, 2014). Available at SSRN: https://ssrn.com/abstract=2436698 or http://dx.doi.org/10.2139/ssrn.2436698

Ravi Sastry

University of Melbourne - Department of Finance ( email )

Level 12
198 Berkeley Street
Victoria 3010
Australia

James L. Smith

affiliation not provided to SSRN

Rex W. Thompson (Contact Author)

affiliation not provided to SSRN

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