Public Disclosure by ‘Small’ Traders

Luca Gelsomini
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Luca Gelsomini: IESEG School of Management (LEM CNRS); CRETA, University of Warwick

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: We model strategic trading by a rent-seeking insider, who exchanges without being spotted, and propose a comprehensive theory of market non-anonymity. Several novel results are established. They depend on asset value proprieties, beliefs, inter-temporal choices, and investors’ characteristics. In equilibrium, under a regulation mandating public trade revelation, disclosures may shift prices. If they do, uninformed manipulations arise only in some instances. Speci…cally, insiders constrained on asset holdings earn more than they would without such a disclosure rule. Consequently, mandating disclosures is unnecessary, as informative trades will be revealed voluntarily. This result reveals a previously unexplored link to the literature on (uncerti…ed/non-factual)announcements. JEL classification: D82 ;G12 ;G14 ; G38

Keywords: Mandatory vs. voluntary public disclosure; securities regulation; insider trading; market manipulation. (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:998

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