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Information Sales and Insider Trading with Long-lived Information

Author

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  • Giovanni Cespa

    (Queen Mary, University of London)

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

  • Giovanni Cespa, 2007. "Information Sales and Insider Trading with Long-lived Information," Working Papers 613, Queen Mary University of London, School of Economics and Finance.
  • Handle: RePEc:qmw:qmwecw:wp613
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    File URL: http://www.econ.qmul.ac.uk/media/econ/research/workingpapers/archive/wp613.pdf
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    References listed on IDEAS

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    Cited by:

    1. García, Diego & Urošević, Branko, 2013. "Noise and aggregation of information in large markets," Journal of Financial Markets, Elsevier, vol. 16(3), pages 526-549.
    2. Cespa, Giovanni & Foucault, Thierry, 2008. "Insiders-outsiders, transparency and the value of the ticker," CFS Working Paper Series 2008/39, Center for Financial Studies (CFS).

    More about this item

    Keywords

    Information sales; Analysts; Insider trading; Durable goods monopolist;

    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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