ABSTRACT
I examine the possibility of informationâbased trading in a multiperiod consumption setting. I develop a necessary and sufficient condition for trade to occur. Intertemporal substitution introduces a desire to correlate current consumption with future aggregate shocks. When agents have heterogeneous timeâinseparable preferences, information differentially affects relative preferences for current and future consumption, making informationâbased trading mutually acceptable. The noâtrade result continues to hold if there is no aggregate shock, or if agents have either homogeneous or timeâseparable preferences.
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