Security Analysis and Trading Patterns When Some Investors Receive Information Before Others

Anderson Graduate School of Management Working Paper at UCLA Number 7-93

Posted: 14 Sep 1999

See all articles by David A. Hirshleifer

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business; NBER

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area; Institute of Global Finance, UNSW Business School; Financial Research Network (FIRN)

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: May 26, 1994

Abstract

In existing models of information acquisition, all informed investors receive their information at the same time. This paper analyzes trading behavior and equilibrium information acquisition when some investors receive common private information before others. The model implies that under some conditions, investors will focus only on a subset of securities (herding), while neglecting other securities withidentical exogenous characteristics. In addition, the model is consistent with empirical correlations that are suggestive of the oft-cited trading strategies such as profit-taking (short-term position reversal) and following- the-leader (mimicking earlier trades).

JEL Classification: G14

Suggested Citation

Hirshleifer, David A. and Subrahmanyam, Avanidhar and Titman, Sheridan, Security Analysis and Trading Patterns When Some Investors Receive Information Before Others (May 26, 1994). Anderson Graduate School of Management Working Paper at UCLA Number 7-93. Available at SSRN: https://ssrn.com/abstract=5504

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business ( email )

Irvine, CA California 92697-3125
United States

HOME PAGE: http://sites.uci.edu/dhirshle/

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Avanidhar Subrahmanyam (Contact Author)

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-5355 (Phone)
310-206-5455 (Fax)

Institute of Global Finance, UNSW Business School

Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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