Beschreibung:
We explore information leadership in the financial market. We first study an endogenous network formation model in which traders link with each other before financial tradings. We show the only stable outcome is a star network in which every trader links to the same person. The centre of this star network, as an information leader, communicates hard information to every participant of the network, causing excessive volatility in the financial market. We then study active information leadership by allowing the information leader to manipulate the information at a cost. Even rational traders rely on the manipulated public information to make trading decisions, so the market price partially reflects the information leader's preference. The exact influence of the information leader increases with the risk aversion but decreases with the private information accuracy and market noise accuracy