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This paper examines the time series properties of the price of a risky asset implied by a model in which competitive traders are heterogeneously informed about the underlying sources of uncertainty in the economy.Traders do not observe the shocks in the period they occur. However, traders are imperfectly and heterogeneously informed about these shocks for three reasons:(1) the shocks are serially correlated arid hence partially forecast able from their past history, (2) each trader receives private signals about the current values of a subset of the shocks, and (3) the equilibrium price conveys information about the private signals and beliefs of other traders. Since prices convey information in this economy, traders will face an infinite regress problem in expectations associated with their desire to forecast the beliefs of others, the beliefs of others about average beliefs, etc.The equilibrium time series representation for the price of the risky security is deduced in various imperfect information environments. Then the volatility and autocorrelations of prices in this model are compared to the corresponding statistics for a model in which agents are homogeneously informed.

Investment analysis --- Stock price forecasting. --- Mathematical models.