Investors typically cover a limited number of stocks and have some degree of correlation in their information sets. However, the role of this type of correlation in determining the return comovement between stock pairs is largely unexplored. In this study, we propose a new measure of common...

Does increasing the traders' understanding of the functioning of financial markets lead to rational expectations equilibrium? We provide an answer by studying a simple exchange economy with complete markets and asymmetric information. Each trader is either a fundamentalist, who knows the...

Does increasing the traders' understanding of the functioning of financial markets lead to rational expectations equilibrium? We provide an answer by studying a simple exchange economy with complete markets and asymmetric information. Each trader is either a fundamentalist, who knows the...