Clustering on the Same News Sources in an Asset Market

We study the incentives to acquire information from exclusive news sources versus information from popular sources in a CARA-normal asset market. Each trader is able to observe one of a finite number of news sources. Clustering on the most precise source can happen for two reasons. One is standard: traders do not care that they dilute others' profits by trading on the same information. The other reason is more novel: traders with different information sets may respond to the same news differently — when this is so, they can benefit by coordinating their attention on the same news source in order to take opposite sides of the market. News from such a source will generate abnormal volume that need not be accompanied by large price movement. Furthermore, we show that as the number of sources grows, traders concentrate their attention on a few of the best ones, leaving most information unexploited