ON AGGREGATION OF INFORMATION IN COMPETITIVE MARKETS - THE DYNAMIC CASE

This article examines, in the spirit of Hellwig (1980), how a dynamic competitive security market aggregates and communicates information be tween various market participants at every instant. It employs a conti nuous time economy consisting of a large number of heterogeneous agent s who are endowed with noisy private signals about the risky asset pay off of differing precision. It yields a stationary rational expectatio ns equilibrium in which at every instant the agents use information co ntained in the market prices without rendering their private informati on redundant, It shows that the market price reflects only that part o f private information which is common to many signals and, thus, exten ds Hellwig's single-period results to a multi-period model.