Trade and the Revelation of Information through Prices and Direct Disclosure

This paper analyzes the volume of trade in a multiperiod noisy rational expectations model. When traders receive private signals at the first trading date and are allowed a second round of trade, two types of equilibria exist. In the first, traders do not learn about the average private signal from the second round of trade and all trade takes place at the first date. In the second, traders do learn from the second round and trade thus takes place at both the first and second dates. The paper then characterizes volume when a public signal is disclosed at the second date.