Learning Process of Uninformed Traders and Information Efficiency

This paper investigates the relationship between learning process of uninformed traders and information efficiency in the security market in which there are short-sale constraints, financing constraints, asymmetric information and difference in opinions between the traders. Using Bayes Law, we formulated the speed of information convergence (SIC), and found that the private information can be revealed at an exponential convergence speed. Short-sale constraints and financing constraints will decrease the SIC. Short-sale constraints restrain the bad news much worse, and financing constraints restrain the good news much worse. the SIC will increase with the proportion of informed traders. The more the traderspsila opinions are centralized, the quicker the private information is revealed.