Those Who Know Most: Insider Trading in Eighteenth-Century Amsterdam

Peter Koudijs

Journal of Political Economy, 2015, vol. 123, issue 6, 1356 - 1409

Abstract: This paper studies how private information is incorporated into prices, using a unique setting from the eighteenth century that is closer to stylized models of price discovery than modern-day markets. Specifically, the paper looks at English securities traded in both London and Amsterdam. Private information reached Amsterdam through sailing boats that sailed only twice a week and in adverse weather could not sail at all. Results are consistent with a Kyle model in which informed agents trade strategically. Most importantly, the speed of information revelation in Amsterdam depended on the expected time until the private signal would become public.

Date: 2015
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