New Economics Papers
on Market Microstructure
Issue of 2007‒02‒03
one paper chosen by
Thanos Verousis

  1. Information Sales and Insider Trading with Long-lived Information By Giovanni Cespa

  1. By: Giovanni Cespa (University of Salerno, CSEF and CEPR)
    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 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.
    Keywords: Information Sales, Analysts, Insider Trading, Durable Goods Monopolist.
    JEL: G10 G12 G14 L12
    Date: 2007–01–01

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