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Information aggregation in financial markets with career concerns

Dasgupta, Amil ORCID: 0000-0001-8474-9470 and Prat, Andrea (2008) Information aggregation in financial markets with career concerns. Journal of Economic Theory, 143 (1). pp. 83-113. ISSN 1095-7235

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Identification Number: 10.1016/j.jet.2008.01.005


What are the equilibrium features of a dynamic financial market in which traders care about their reputation for ability? We modify a standard sequential trading model to include traders with career concerns. We show that this market cannot be informationally efficient: there is no equilibrium in which prices converge to the true value, even after an infinite sequence of trades. We characterize the most revealing equilibrium of this game and show that an increase in the strength of the traders' reputational concerns has a negative effect on the extent of information that can be revealed in equilibrium but a positive effect on market liquidity.

Item Type: Article
Official URL:
Additional Information: © 2008 Elsevier Inc.
Divisions: Economics
Subjects: H Social Sciences > HG Finance
JEL classification: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty
G - Financial Economics > G0 - General
Date Deposited: 08 Feb 2011 11:08
Last Modified: 03 Apr 2024 01:33

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