2015), Information Diversity and Complementarities in Trading and Information Acquisition,Journal of Finance 70

We analyze a model in which different traders are informed of different fundamentals that affect the security value. We identify a source for strategic complementarities in trading and information acquisition: aggressive trading on information about one fundamental reduces uncertainty in trading on information about the other funda-mental, encouraging more trading and information acquisition on that fundamental. This tends to amplify the effect of exogenous changes in the underlying information environment. Due to complementarities, greater diversity of information in the econ-omy improves price informativeness. We discuss the relation between our model and recent financial phenomena and derive testable empirical implications. SECURITY PRICES REFLECT INFORMATION available to traders about future pay-offs. Uncertainty about these payoffs typically involves multiple dimensions. Obvious examples include multinational firms, for which there is uncertainty originating from the different countries where the firm operates, and conglom-erates, for which there is uncertainty about the different industries the firm operates in. More generally, even focused firms are exposed to multiple dimen-sions of uncertainty: cash flows depend on the demand for firms ’ products and the technology they develop, on firms ’ idiosyncratic developments and the way they are affected by the macroeconomy or the industry, and on the success of firms ’ operations in traditional lines of business and in new speculative lines o