Using Privileged Information To Manipulate Markets: Insiders, Gurus And Credibility
AbstractAccess to private information is shown to generate both the incentives and the ability to manipulate asset markets through strategically distorted.announcements. The fact that privileged information is noisy interferes with the public's attempts to learn whether such announcements are honest; it allows opportunistic individuals to manipulate prices repeatedly without ever being fully found out. This leads the authors to extend Joel Sobel's (1985) model of strategic communication to the case of noisy private signals. Their results show that when truthfulness is not easily verifiable, restrictions on trading by insiders may be needed to preserve the integrity of information embodied in prices. Copyright 1992, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Bibliographic InfoPaper provided by Princeton, Woodrow Wilson School - Discussion Paper in its series Papers with number 19.
Length: 32 pages
Date of creation: 1988
Date of revision:
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Postal: PRINCETON UNIVERSITY, WOODROW WILSON SCHOOL OF PUBLIC AND INTERNATIONAL AFFAIRS, DEPARTMENT OF ECONOMICS, PRINCETON NEW-JERSEY 08542 U.S.A.
Phone: (609) 258-4800
Web page: http://www.wws.princeton.edu/
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information ; profit ; games ; financial market;
Other versions of this item:
- Benabou, Roland & Laroque, Guy, 1992. "Using Privileged Information to Manipulate Markets: Insiders, Gurus, and Credibility," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 921-58, August.
- Benabou, R. & Laroque, G., 1992. "Using privileged information to manipulate markets: insiders, gurus, and credibility," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
- Benabou, R. & Laroque, G., 1989. "Using Privileged Information To Manipulate Markets: Insiders, Gurus, And Credibility," Working papers 513, Massachusetts Institute of Technology (MIT), Department of Economics.
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- Manove, Michael, 1989. "The Harm from Insider Trading and Informed Speculation," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 823-45, November.
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