Insider Trading and the Announcement of Forecasted Stock Value
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Security firms continuously update and announce forecasted value of corporate stocks. This paper provides one possible explanation for the announcement of the forecasted stock value, together with the effect of the announcement. With a model similar to that of Kyle (1985), it is shown that the announcement reduces the information rent of the insider and accordingly, the loss of the noise traders. It is shown, however, that the trading volume does not change with the announcement of the forecasted stock value.
Abstract
Security firms continuously update and announce forecasted value of corporate stocks. This paper provides one possible explanation for the announcement of the forecasted stock value, together with the effect of the announcement. With a model similar to that of Kyle (1985), it is shown that the announcement reduces the information rent of the insider and accordingly, the loss of the noise traders. It is shown, however, that the trading volume does not change with the announcement of the forecasted stock value.
참고문헌 (7)
- Hogg, R. V, "Introduction to Mathematical Statistics" (1978), MacMillan
- Huddart, S., "Public Disclosure and Dissimulation of Insider Trades", mimeo, Econometrica, 69(3), pp.665~681 (2001)
- Ke, B, "What insiders know about future earnings and how they use it : evidence from insider trades", mimeo (2001)
- Kim, O, "Trading Volume and Price Reactions to Public Announcements", Journal of Accounting Research, 29 (1991)
- Kyle, A, "Continuous Auctions and Insider Trading", Econometrica, 53(6), pp.1315~1335 (1985)
- Milgrom, P, "Information, Trade and Common Knowledge", Journal of Economic Theory, 26(1), pp.17~27 (1982)
- Grossman, S, "On the Impossibility of Informationally Efficient Markets", American Economic Review, 70(1), pp.393~408 (1980)