Complementarities in Information Acquisition with Short-Term Trades

In a financial market where agents trade for prices in the short-term and where news can increase the uncertainty of the public belief, there are strategic complementarities in the acquisition of private information and a continuum of equilibrium strategies if the cost of information is sufficient small. Imperfect observation of the past prices reduces the continuum of Nash-equilibrium to a unique one which may be a Strongly Rational-Expectations Equilibrium. In that equilibrium, because of the strategic complementarity, there are two sharply different regimes for the evolution of the price, the volume of trade and the information acquisition which is either nil or at its maximum.