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 |
JEL(s): | G10, G14 |
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.