Information Sales and Insider Trading

Giovanni Cespa

No 4667, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 themself. This forces them 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 (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 L12 (search for similar items in EconPapers)
Date: 2004-10
New Economics Papers: this item is included in nep-fin and nep-fmk
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Citations: View citations in EconPapers (7)

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