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Information Sales and Insider Trading with Long-lived Information

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 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 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.

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Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 174.

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Date of creation: 01 Jan 2007
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Publication status: Published in Journal of Finance, 2008, 63 (2), pages 639-672
Handle: RePEc:sef:csefwp:174
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