-- A N N O U N C E M E N T -- The Finance Research Seminar, IHS, presents Dominique DUPONT (Board of Governors of the Federal Reserve System) "Equilibrium Price with Institutional Investors and with Naive Traders" Monday, Dec.13 1999, 4:30pm-6pm IHS, HS II, Stumpergasse 56, 1060 Wien, Abstract: This paper uses an equilibrium framework to study how institutional investors, through their ability to better process information, influence the volatility and the informativeness of asset prices. The model features a price-sensitive liquidity trader and multiple informed traders, each of whom observes a private signal correlated with the true value of the asset. These informed traders are alternatively institutional investors, who are "rational" insofar as they condition on the market clearing price when making investment decisions, and individual investors, who are "naive" insofar as they do not condition on the equilibrium price. The model shows that the equilibrium price is more volatile and less informative when the informed traders are rational than when they are naive. The dependence of the informativeness and the variance of the equilibrium price on the model^Òs parameters is also investigated. The paper can be downloaded at http://www.ihs.ac.at/departments/fin/dupont-pub =========================================================================