Insiders-Outsiders, Transparency and the Value of the Ticker

Giovanni Cespa and Thierry Foucault

No 628, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: We consider a multi-period rational expectations model in which risk-averse investors differ in their information on past transaction prices (the ticker). Some investors (insiders) observe prices in real-time whereas other investors (outsiders) observe prices with a delay. As prices are informative about the asset payoff, insiders get a strictly larger expected utility than outsiders. Yet, information acquisition by one investor exerts a negative externality on other investors. Thus, investors' average welfare is maximal when access to price information is rationed. We show that a market for price information can implement the fraction of insiders that maximizes investors' average welfare. This market features a high price to curb excessive acquisition of ticker information.We also show that informational efficiency is greater when the dissemination of ticker information is broader and more timely.

Keywords: Market data sales; Latency; Transparency; Price discovery; Hirshleifer effect (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Date: 2008-04-01
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Insiders-Outsiders, Transparency and the Value of the Ticker (2011)
Working Paper: Insiders-Outsiders, Transparency and the Value of the Ticker (2008)
Working Paper: Insiders-outsiders, transparency and the value of the ticker (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:628

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