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Transfer of information by an informed trader

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  • Dev, Pritha
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    Abstract

    This 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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    File URL: http://www.sciencedirect.com/science/article/pii/S1544612313000044
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    Bibliographic Info

    Article provided by Elsevier in its journal Finance Research Letters.

    Volume (Year): 10 (2013)
    Issue (Month): 2 ()
    Pages: 58-71

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    Handle: RePEc:eee:finlet:v:10:y:2013:i:2:p:58-71

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    Web page: http://www.elsevier.com/locate/frl

    Related research

    Keywords: Market microstructure; Transfer of information;

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    References

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