TY - JOUR
T1 - Information arrival, delay, and clustering in financial markets with dynamic freeriding
AU - Aghamolla, Cyrus
AU - Hashimoto, Tadashi
N1 - Publisher Copyright:
© 2020 Elsevier B.V.
PY - 2020/10
Y1 - 2020/10
N2 - We study informational freeriding in a model where agents privately acquire information and then decide when to reveal it by taking an action. Examples of such freeriding are prevalent in financial markets, e.g., the timing of initial public offerings, analysts’ forecasts, and mutual funds’ investment decisions. The main results show that, in large populations, few agents provide significant information while the vast majority of agents freeride. We highlight the role of uncertainty and market size in shaping the dynamics of price discovery. Among other results, we find that heightened uncertainty over the underlying state enhances information production, yet weakens the precision and speed of information aggregation in the market.
AB - We study informational freeriding in a model where agents privately acquire information and then decide when to reveal it by taking an action. Examples of such freeriding are prevalent in financial markets, e.g., the timing of initial public offerings, analysts’ forecasts, and mutual funds’ investment decisions. The main results show that, in large populations, few agents provide significant information while the vast majority of agents freeride. We highlight the role of uncertainty and market size in shaping the dynamics of price discovery. Among other results, we find that heightened uncertainty over the underlying state enhances information production, yet weakens the precision and speed of information aggregation in the market.
KW - Endogenous timing
KW - Herding
KW - Information acquisition
KW - Information provision
KW - Informational freeriding
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U2 - 10.1016/j.jfineco.2020.04.011
DO - 10.1016/j.jfineco.2020.04.011
M3 - Article
AN - SCOPUS:85084145644
SN - 0304-405X
VL - 138
SP - 27
EP - 52
JO - Journal of Financial Economics
JF - Journal of Financial Economics
IS - 1
ER -