Premium
Security Analysis and Trading Patterns When Some Investors Receive Information Before Others
Author(s) -
HIRSHLEIFER DAVID,
SUBRAHMANYAM AVANIDHAR,
TITMAN SHERIDAN
Publication year - 1994
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1994.tb04777.x
Subject(s) - herding , private information retrieval , trading strategy , profit (economics) , business , inside information , position (finance) , financial economics , herd behavior , economics , monetary economics , microeconomics , finance , computer science , computer security , forestry , geography
In existing models of information acquisition, all informed investors receive their information at the same time. This article 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 with identical exogenous characteristics. In addition, the model is consistent with empirical correlations that are suggestive of oft‐cited trading strategies such as profit taking (short‐term position reversal) and following the leader (mimicking earlier trades).