Market professional performance under insider information leakage

We construct a multiagent model in which an insider simultaneously discloses information to a market professional and outsiders, and characterize the resulting linear equilibrium. Our analysis yields three main results. First, the insider strategically adjusts the precision of disclosure based on the quality of the market professional information. Second, when the market professional is well-informed, their expected profits under information leakage exceed those without leakage, resulting in a form of self-relative outperformance that departs from previous theories. Third, market liquidity and price efficiency exhibit an inverted U-shaped relationship with the precision of the market professional’s information. Using Chinese A-share data, we find empirical evidence consistent with these predictions. We find that information spillovers may coexist with stronger incentives for information production, underscoring the need for tailored regulatory approaches.