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Strategic trading when agents forecast the forecasts of others

Publication ,  Journal Article
Foster, FD; Viswanathan, S
Published in: Journal of Finance
January 1, 1996

We analyze a multi-period model of trading with differentially informed traders, liquidity traders, and a market maker. Each informed trader's initial information is a noisy estimate of the long-term value of the asset, and the different signals received by informed traders can have a variety of correlation structures. With this setup, informed traders not only compete with each other for trading profits, they also learn about other traders' signals from the observed order flow. Our work suggests that the initial correlation among the informed traders' signals has a significant effect on the informed traders' profits and the informativeness of prices.

Duke Scholars

Published In

Journal of Finance

DOI

ISSN

0022-1082

Publication Date

January 1, 1996

Volume

51

Issue

4

Start / End Page

1437 / 1478

Related Subject Headings

  • Finance
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1502 Banking, Finance and Investment
 

Citation

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Foster, F. D., & Viswanathan, S. (1996). Strategic trading when agents forecast the forecasts of others. Journal of Finance, 51(4), 1437–1478. https://doi.org/10.1111/j.1540-6261.1996.tb04075.x
Foster, F. D., and S. Viswanathan. “Strategic trading when agents forecast the forecasts of others.” Journal of Finance 51, no. 4 (January 1, 1996): 1437–78. https://doi.org/10.1111/j.1540-6261.1996.tb04075.x.
Foster FD, Viswanathan S. Strategic trading when agents forecast the forecasts of others. Journal of Finance. 1996 Jan 1;51(4):1437–78.
Foster, F. D., and S. Viswanathan. “Strategic trading when agents forecast the forecasts of others.” Journal of Finance, vol. 51, no. 4, Jan. 1996, pp. 1437–78. Scopus, doi:10.1111/j.1540-6261.1996.tb04075.x.
Foster FD, Viswanathan S. Strategic trading when agents forecast the forecasts of others. Journal of Finance. 1996 Jan 1;51(4):1437–1478.
Journal cover image

Published In

Journal of Finance

DOI

ISSN

0022-1082

Publication Date

January 1, 1996

Volume

51

Issue

4

Start / End Page

1437 / 1478

Related Subject Headings

  • Finance
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1502 Banking, Finance and Investment