Abstract
We study the information choice problem of overlapping cohorts of two-period lived traders in competitive asset markets to gain an understanding of short-term traders' incentives for acquiring costly private information. At the intra-cohort level, we show that information acquisition displays strategic substitutability among traders of the same cohort for a given share of informed traders of the other cohort, irrespective of traders facing endogenous price risk or exogenous fundamental risk. We also examine the inter-cohort effects of information acquisition and establish that traders of the two cohorts exert an asymmetric impact on each other's incentives for acquiring information. More traders of the first cohort acquiring information discourages information acquisition on the part of traders of the second cohort. To the contrary, the incentives of traders of the first cohort for acquiring information tend to be strenghtened as more traders of the second cohort acquire information, unless increases in the correlation of period one and two equilibrium asset prices strongly deteriorate the relative gain of informed trading.