We introduce a dynamic noisy rational expectations model, in which information diffuses through a general network of agents. In equilibrium, agents’ trading behavior and profitability are determined by their position in the network. Agents who are more closely connected have more similar period-by-period trades, and an agent’s profitability is determined by how central the agent is, using a centrality measure that is closely related to so-called Katz centrality. The model generates rich dynamics of aggregate trading volume and volatility, beyond what can be generated by heterogeneous preferences in a symmetric setting. Casual observations suggest that price and
volume dynamics of small stocks in the market may be especially well explained by such asymmetric
information diffusion. The model could potentially be used to study individual investor behavior
and performance, and to analyze endogenous network formation in financial markets.