DP6794 Insiders-Outsiders, Transparency and the Value of the Ticker
|Author(s):||Giovanni Cespa, Thierry Foucault|
|Publication Date:||April 2008|
|Date Revised:||July 2008|
|Keyword(s):||Hirshleifer effect, Market data sales, Price discovery, Transparency|
|Programme Areas:||Financial Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=6794|
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.