Conformism and Public News

27 Pages Posted: 14 Feb 2011

See all articles by Gabriel Desgranges

Gabriel Desgranges

University of Cergy-Pontoise

Céline Rochon

International Monetary Fund (IMF)

Date Written: February 2011


We study a model where investment decisions are based on investors’ information about the unknown and endogenous return of the investment. The information of investors consists of endogenously determined messages sold by financial analysts who have access to both public and private information on the return of the investment. We assume that the return of the investment is correlated with the aggregate investment. This results into a beauty contest among analysts (or a "conformism" effect). In equilibrium, analysts sell all the information they have to all the investors. A striking result is that there are sometimes multiple equilibria. There are equilibria where the beauty contest is exacerbated. Because of the correlation across analysts' information sources, not all the information available in the economy is transmitted to investors.

Keywords: Economic models, Private investment, Public information notices

Suggested Citation

Desgranges, Gabriel and Rochon, Céline, Conformism and Public News (February 2011). IMF Working Paper No. 11/33, Available at SSRN:

Gabriel Desgranges

University of Cergy-Pontoise ( email )

33 Boulevard du Port
Cergy-Pontoise Cedex, Cedex 95011

Céline Rochon (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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