This study extends prior work on the measurement of informed trading to the Brazilian equity market. The quantitative analysis employed two market cleanliness methodologies that have been widely applied in academic and regulatory research and that could be replicated using public data. The analysis advances our understanding of Brazil’s capital market integrity, provides a baseline for assessme...

Short-termism need not breed informational price inefficiency even when generating Beauty Contests. We demonstrate this claim in a two-period market with persistent liquidity trading and risk-averse, privately informed, short-term investors and find that prices reflect average expectations about fundamentals and liquidity trading. Informed investors engage in “retrospective” learning to reasses...

In asymmetric information models of financial markets, prices imperfectly reveal the private information held by traders. Informed insiders thus have an incentive not only to trade less aggressively but also to manipulate the market by trading in the wrong direction and undertaking short term losses, so as to ‘confuse’ the market and increase the noise in the trading process. In this paper we s...

This paper presents a synthesized model of asymmetric information. An empirical analysis of more than 1,400 NYSE common stocks shows that trade direction is more important than volume in revealing the asymmetry. There is also evidence to suggest that signed duration reflects informed trading activity. We use the proposed measure of information asymmetry to study daily changes in the level of in...

We study the manipulation of prices in a dynamic version Glosten and Milgrom (1985) model with long-lived informed trader. clarify conditions under which unique equilibrium exists show that when is unique, bid ask are monotonically increasing functions market maker’s belief about value asset. also characterize situations this involves by Finally, we describe computational method to find equilib...

We investigate the contribution of option markets to price discovery, using a modification of Hasbrouck’s (1995) “information share” approach. Based on five years of stock and options data for 60 firms, we estimate the option market’s contribution to price discovery to be about 17% on average. Option market price discovery is related to trading volume and spreads in both markets, and stock vola...

This paper, in a Shapley-Shubik market game framework, examines the effect of “leakage” of information: private information becoming available to uninformed traders at a later date. We show that (a) If information acquisition by the informed traders is costless, this leads to faster revelation of information; (b) If information acquisition is costly, there may be no acquisition of information; ...

This study shows that the guardians behind underaged accounts are successful at picking stocks. Moreover, they tend to channel their best trades through the accounts of children, especially when they trade just before major earnings announcements, large price changes, and takeover announcements. Building on these results, we argue that the proportion of total trading activity through underaged ...

We develop a theoretical model of government intervention in which with private information trades strategically other market participants to achieve its policy goal stabilizing asset prices. When the has precise and prioritizes goal, both informed insider engage reversed trading strategies, but they trade against each other. Government can improve liquidity price efficiency, effectiveness depe...