Informational Efficiency and Asset Prices in Large Markets

We study a noisy general rational expectations equilibrium in an economy with big trading data, populated by asymmetrically informed logarithmic investors. We show that the equilibrium can be either fully or partially revealing about macroeconomic shocks privately observed by informed investors, depending on economic parameters and the extent of endogenous information overlap across data sources. We find that trades in derivative securities reveal substantial information about the shocks; interest rates signal impending economic downturns; and asset prices jump when output volatility transitions across thresholds separating fully and partially revealing equilibria in the parameter space. In contrast to markets with logarithmic investors, in markets with CARA investors derivatives data reveals little information and the quantity of this information does not depend on the data set's dimension.