Christophe Chamley
Department of Economics
Boston University
270, Bay State Road
Boston, MA, 02215
(617) 353 4250
Room 401
e-mail : chamley@bu.edu
Rational Herds
Economic
models of social learning
Cambridge University Press, January 2004
COURSE : State Finances in History Ec365
- Information
failures in
financial markets (November 2004)
Two models of financial market with risk-averse agents are built on
the standard structure with a continuum of partially informed
agents
and noise traders. The key assumption is the boundedness of the private
information. In the first model, the private information is a binary
signal
and the precision of beliefs generated by the market may decline; in
the
second, the fundamental value of the asset is related to the mass of
agents
participating in the market and the precision of the aggregate
information
is always increased by the market. In both models, because a higher
order
flow generates more market information, there is strategic
complementarity
between agents' trades, between the gatherings of private information,
and multiple equilibria with markedly different levels of informations.
- Complementarities
in Information Acquisition with Short-Term Trades failures in
financial markets
(New version, reduced and expanded with
a simple 2-period model) July 20, 2006.
In a financial market where agents
trade for short-term profit and where news can increase the uncertainty
of the public belief, there are strategic complementarities in the
acquisition of private information and if the cost of information is
sufficient small, a continuum of equilibrium strategies. Imperfect
observation of past prices reduces the continuum of Nash-equilibrium to
a Strongly Rational-Expectations Equilibrium. In that
equilibrium, there are two sharply different regimes for the
evolution of the price, the volume of trade and the information
acquisition.