Transfer of information by an informed trader
AbstractThis paper analyzes the effect of the transfer of information by an informed strategic trader (owner) to another strategic player (buyer). It shows that while the owner will never fully divulge his information, he may transfer a noisy signal of his information to the buyer. With such a transfer, the owner loses some of his informational superiority and yet increases his trading profit. I also show that if the transfer can be made to more than one buyer, then, the owner’s profit is increasing in the number of other buyers to whom the transfer is made.
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Bibliographic InfoArticle provided by Elsevier in its journal Finance Research Letters.
Volume (Year): 10 (2013)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/frl
Market microstructure; Transfer of information;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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