Discussion of 'Financial Reporting Opacity and Informed Trading by International Institutional Investors'
24 Pages Posted: 13 Aug 2012
Date Written: August 1, 2012
Abstract
Maffett (2012) finds that the opacity of a firm's information environment affects the degree of informed trade by institutional investors. In this discussion, I address the key research design choices involved in studies of opacity and informed trading and I relate the results to the literature on institutional investor performance and stock selection. I suggest that future work investigate the role of discretionary opacity in facilitating informed trade as part of the cost-benefit trade-off of the opacity decision maker (e.g., managers, analysts); test the relative effects of opacity on private information, liquidity, and price correction speed; and examine how institutional investors select which opaque firms to hold.
Keywords: Opacity, Informed Trade, Institutional Investors
Suggested Citation: Suggested Citation
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