Information Use and Transference among Legally Separated Share Markets—An Experimental Approach

Li Qi and Jack Ochs

Southern Economic Journal, 2009, vol. 76, issue 1, 99-129

Abstract: Several countries have adopted legally separated share markets (LSSM), where local firms market separate claims to the same dividend flow to domestic and foreign investors who cannot arbitrage across LSSM. We designed a laboratory experiment to test whether the inside information in one LSSM is reflected in the prices of both markets. We find that insider information does transfer across markets. The extent of this transfer depends upon whether the location of insiders is publicly known, how close prices in the informed market get to the full information equilibrium, and how much the price variance is in this market. We also observe insiders' behavior and performance under different market conditions. Efforts by insiders to manipulate the market increase when their location is unknown to the public. On average such efforts pay off to the whole group of insiders but not to the initiator of these manipulative transactions.

Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.4284/sej.2009.76.1.99

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:wly:soecon:v:76:y:2009:i:1:p:99-129

Access Statistics for this article

More articles in Southern Economic Journal from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().