Insiders-outsiders, transparency and the value of the ticker
- We consider a multi-period rational expectations model in which risk-averse investors differ in their information on past transaction prices (the ticker). Some investors (insiders) observe prices in real-time whereas other investors (outsiders) observe prices with a delay. As prices are informative about the asset payoff, insiders get a strictly larger expected utility than outsiders. Yet, information acquisition by one investor exerts a negative externality on other investors. Thus, investors’ average welfare is maximal when access to price information is rationed. We show that a market for price information can implement the fraction of insiders that maximizes investors’ average welfare. This market features a high price to curb excessive acquisition of ticker information. We also show that informational efficiency is greater when the dissemination of ticker information is broader and more timely.
| Author: | Giovanni Cespa, Thierry Foucault |
|---|---|
| URN: | urn:nbn:de:hebis:30-62189 |
| Parent Title (German): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2008,39 |
| Series (Serial Number): | CFS working paper series (2008, 39) |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2008 |
| Year of first Publication: | 2008 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2009/01/29 |
| Tag: | Hirshleifer Effect; Latency; Market Data Sales; Price Discovery; Transparency |
| HeBIS-PPN: | 210173610 |
| Institutes: | Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Licence (German): |  Deutsches Urheberrecht |
