Product Market Competition, Insider Trading, and Stock Market Efficiency

Joel Peress

Journal of Finance, 2010, vol. 65, issue 1, 1-43

Abstract: How does competition in firms' product markets influence their behavior in equity markets? Do product market imperfections spread to equity markets? We examine these questions in a noisy rational expectations model in which firms operate under monopolistic competition while their shares trade in perfectly competitive markets. Firms use their monopoly power to pass on shocks to customers, thereby insulating their profits. This encourages stock trading, expedites the capitalization of private information into stock prices and improves the allocation of capital. Several implications are derived and tested.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (137)

Downloads: (external link)
https://doi.org/10.1111/j.1540-6261.2009.01522.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:65:y:2010:i:1:p:1-43

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().