In existing models of information acquisition, all informed investors
receive their information at the same time. This article analyzes trading
behavior and equilibrium information acquisition when some investors
receive common private information before others. The model implies that,
under some conditions, investors will focus only on a subset of securities
('herding'), while neglecting other securities with identical exogenous
characteristics. In addition, the model is consistent with empirical
correlations that are suggestive of oft-cited trading strategies such as
profit taking (short-term position reversal) and following the leader
(mimicking earlier trades).
Copyright 1994 by American Finance Association.