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Information Sales and Insider Trading

Author

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  • Cespa, Giovanni

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. Similarly to a durable goods monopolist, a monopolistic analyst selling information intertemporally competes against themself. This forces them to partially relinquish control over the information flow to traders. Conversely, an insider solves the intertemporal competition problem through vertical integration, thus exerting a tighter control over the flow of information. 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.

Suggested Citation

  • Cespa, Giovanni, 2004. "Information Sales and Insider Trading," CEPR Discussion Papers 4667, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4667
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    Citations

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    Cited by:

    1. Jhinyoung Shin & Rajdeep Singh, 2010. "Corporate Disclosures: Strategic Donation of Information," International Review of Finance, International Review of Finance Ltd., vol. 10(3), pages 313-337, September.
    2. Foucault, Thierry & Cespa, Giovanni, 2008. "Insiders-outsiders, transparency and the value of the ticker," HEC Research Papers Series 892, HEC Paris.
    3. Foucault, Thierry & Cespa, Giovanni, 2008. "Insiders-outsiders, transparency and the value of the ticker," HEC Research Papers Series 892, HEC Paris.
    4. Dugast, Jérôme & Foucault, Thierry, 2018. "Data abundance and asset price informativeness," Journal of Financial Economics, Elsevier, vol. 130(2), pages 367-391.
    5. Raffi Indjejikian & Hai Lu & Liyan Yang, 2014. "Rational Information Leakage," Management Science, INFORMS, vol. 60(11), pages 2762-2775, November.
    6. Giovanni Cespa & Thierry Foucault, 2014. "Sale of Price Information by Exchanges: Does It Promote Price Discovery?," Management Science, INFORMS, vol. 60(1), pages 148-165, January.

    More about this item

    Keywords

    Information sales; Analysts; Insider trading; Durable goods monopolist;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • 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
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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