STRATEGIC TRADING WHEN AGENTS FORECAST THE FORECASTS OF OTHERS

We analyze a multi-period model of trading with differentially informe d traders, liquidity traders, and a market maker. Each informed trader 's initial information is a noisy estimate of the long-term value of t he asset, and the different signals received by informed traders can h ave a variety of correlation structures. With this setup, informed tra ders not only compete with each other for trading profits, they also l earn about other traders' signals from the observed order now, Our wor k suggests that the initial correlation among the informed traders' si gnals has a significant effect on the informed traders' profits and th e informativeness of prices.