Information sharing in financial markets

Itay Goldstein, Yan Xiong and Liyan Yang

Journal of Financial Economics, 2025, vol. 163, issue C

Abstract: We study information sharing between strategic investors who are informed about asset fundamentals. We demonstrate that a coarsely informed investor optimally chooses to share information if his counterparty investor is well informed. By doing so, the coarsely informed investor invites the other investor to trade against his information, thereby reducing his price impact. Paradoxically, the well informed investor loses from receiving information because of the resulting worsened market liquidity and the more aggressive trading by the coarsely informed investor. Our analysis sheds light on phenomena such as private communications among investors and public information sharing on social media.

Keywords: Information sharing; Trading against error; Trading profits; Asset markets (search for similar items in EconPapers)
JEL-codes: D82 G14 G18 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X24001909
Full text for ScienceDirect subscribers only

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:eee:jfinec:v:163:y:2025:i:c:s0304405x24001909

DOI: 10.1016/j.jfineco.2024.103967

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().