“Dynamic Information Acquisition and Entry into New Markets”by Dr. Snehal Banerjee
Dr. Snehal Banerjee
University of California, San Diego
We model dynamic information acquisition and entry by a strategic trader into a new trading opportunity. Instead of restricting the trader to make her choices before the market opens, we allow her to optimally choose when to enter in response to public news. We show that there exists a unique equilibrium in which optimal entry exhibits delay. The model provides novel implications for how the likelihood and timing of entry, and choice of precision, depend on news volatility and the trading horizon. Our results shed light on the entry behavior of institutional investors into new asset classes like cryptocurrencies.