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We develop a multi‐period auction model in which multiple privately informed agents strategically exploit their long‐lived information. We show that such traders compete aggressively and cause most of their common private information to be revealed very rapidly. In the limit as the interval between auctions approaches zero, market depth becomes infinite and all private information is revealed immediately. These results are in contrast to those of Kyle (1985) in which the monopolistic informed trader causes his information to be incorporated into prices gradually, and, when the interval between auctions is vanishingly small, market depth is constant over time.

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We develop a multi-period auction model in which multiple privately informed agents strategically exploit their long-lived information. We show that such traders compete aggressively and cause most of their common private information to be revealed very rapidly. In the limit as the interval between auctions approaches zero, market depth becomes infinite and all private information is revealed immediately. These results are in contrast to those of Kyle (1985) in which the monopolistic informed trader causes his information to be incorporated into prices gradually, and, when the interval between auctions is vanishingly small, market depth is constant over time. FAMA (1970) DEFINES A "STRONG form" efficient market as one in whichsecurity prices fully reflect all available information, including both publicly and privately held information. In a pioneering and influential article, Kyle (1985) develops a model in which a single privately informed trader with long-lived information optimally exploits his monopoly power over time. Kyle's (1985) main results are: (i) the informed trader trades in a gradual manner, so that his information is incorporated into prices at a slow, almost linear rate, and (ii) when auctions are held continuously, the depth of the market is constant over time. However, Kyle's (1985) assumption of a single informed trader is strong, in the sense that in actual financial markets, it is reasonable to expect that at least a few players will have access to private information and will trade in the knowledge that they will face competition with other informed agents in the market. 1 We develop a multi-period auction model in which multiple (strategic) informed traders optimally exploit their long-lived informational advantage. We thus explore the restrictiveness of Kyle's assumption of a single informed trader, and also examine respectively. We are indebted to an anonymous referee, whose comments and suggestions improved the paper considerably. We also thank for helpful discussions and/or comments. All errors are solely our responsibility.1 An indirect proxy for the number of informed traders per security is the number of security analysts per security who generate private information for sale to brokers and traders. Brennan and Hughes (1990) report that in 1987, on average there were 12.4, 4.0, and 4.8 security analysts making one-year forecasts on firms listed on the NYSE, AMEX, and NASDAQ, respectively. 248The Journal of Finance how quickly the system approaches the perfect competition outcome characterized by the price fully reflecting the information of all privately informed agents.Our basic finding is that in a unique linear equilibrium, informed traders trade very aggressively. Even just two informed traders cause nearly all of their common private information to be incorporated into prices almost immediately and cause the depth of the market to become extremely large almost immediately, provided the number of auctions is reasonably large. Hence, we show that a market with multiple informed...

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