Discussion of 'Financial Reporting Opacity and Informed Trading by International Institutional Investors'

24 Pages Posted: 13 Aug 2012

See all articles by Brian J. Bushee

Brian J. Bushee

University of Pennsylvania - The Wharton School

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

Bushee, Brian J., Discussion of 'Financial Reporting Opacity and Informed Trading by International Institutional Investors' (August 1, 2012). Available at SSRN: https://ssrn.com/abstract=2128607 or http://dx.doi.org/10.2139/ssrn.2128607

Brian J. Bushee (Contact Author)

University of Pennsylvania - The Wharton School ( email )

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