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Information Sales and Insider Trading with Long-Lived Information

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  • GIOVANNI CESPA
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    Abstract

    Fundamental information resembles in many respects a durable good. Hence, the effects of its incorporation into stock prices depend on who is the agent controlling its flow. Like a durable goods monopolist, a monopolistic analyst selling information intertemporally competes against herself. This forces her to partially relinquish control over the information flow to traders. Conversely, an insider solves the intertemporal competition problem through vertical integration, thus exerting tighter control over the information flow. Comparing market patterns I show that a dynamic market where information is provided by an analyst is "thicker" and "more informative" than one where an insider trades. Copyright 2008 by The American Finance Association.

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    Bibliographic Info

    Article provided by American Finance Association in its journal The Journal of Finance.

    Volume (Year): 63 (2008)
    Issue (Month): 2 (04)
    Pages: 639-672

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    Handle: RePEc:bla:jfinan:v:63:y:2008:i:2:p:639-672

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