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Information Aggregation in Markets with Analysts, Experts, and Chatbots

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  • Wolfgang Kuhle

Abstract

The present paper shows that it can be advantageous for traders to publish their information on the true value of an asset even if they (i) cannot build a position in the asset prior to the publication of their information and (ii) cannot charge for the provision of information. The model also shows that the informational content of prices is U-shaped in the number of traders who publish their information. Put differently, information aggregation works best if either no trader, or if every trader publishes his information. Small groups of distinguished experts are, on the contrary, an obstacle to information aggregation. The model's key assumption is that the perception/interpretation of a given piece of published information differs slightly across traders.

Suggested Citation

  • Wolfgang Kuhle, 2024. "Information Aggregation in Markets with Analysts, Experts, and Chatbots," Papers 2411.01938, arXiv.org.
    • Handle: RePEc:arx:papers:2411.01938
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    References listed on IDEAS

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    1. Olga Gorelkina & Wolfgang Kuhle, 2018. "Information Aggregation through Stock Prices and the Cost of Capital," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 174(2), pages 399-420, June.
    2. Iván Werning & George-Marios Angeletos, 2006. "Crises and Prices: Information Aggregation, Multiplicity, and Volatility," American Economic Review, American Economic Association, vol. 96(5), pages 1720-1736, December.
    3. Kandel, Eugene & Pearson, Neil D, 1995. "Differential Interpretation of Public Signals and Trade in Speculative Markets," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 831-872, August.
    4. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
    5. repec:mhr:jinste:urn:sici:0932-4569(201806)174:2_399:iatspa_2.0.tx_2- is not listed on IDEAS
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