REE1

(1) assets

safety asset : yeilding a return R;

risky asset : the return

where is observable at a , and is unobservable. Both and are random variables.

the supply of risky asset : x

(2) individuals.

Informed traders: those who have spent to obtain information and can observe . , the percentage of traders are informed

Uninformed traders: those who observe only price . they do not observe .

Remark: The Uninformed are prevented from learning via observations of because they cannot distinguish variations in price due to changes in the informed trader's information from variations in price due to changes in aggregate supply. Clearly, reveals some of the informed trader's information to the uninformed traders.

3. the characterization of the equilibrium of the economy

Conjecture 1: The more individuals who are informed, the more informative is the price system. 注：more informative ：noise will interfere（干扰） the information conveyed to the price system.

Conjecture 2: The more individuals who are informed, the lower the ratio of expected utility of the informed to the uninformed.

Conjecture 3: The higher the cost of information, the smaller will be the equilibrium percentage of individuals who are informed.

Conjecture 4: If the quality of the informed trader's information( 可通过 的方差的倒数刻画) increases, the more their demands will vary with their information and thus the more prices will vary with . Hence, the price system becomes more informative.

The equilibrium proportion of informed to uninformed may be either increased or decreased, because even though the value of being informed has increased due to the increased quality of , the value of being uninformed has also increased because the price system becomes more informative.价格系统变得更有效，the uninformed can obtain information from price.

Conjecture 5: The greater the magnitude of noise, the less informative will the price system be, and hence the lower the expected utility of uninformed individuals. Hence, in equilibrium the greater the magnitude of noise, the larger the proportion of informed individuals.

评：当噪音很大时，价格传递有效信息的能力较差，informed 和uninformd 的信息差越大。 因此informed能割到更多“韭菜”。