Disclosure, Learning, and Coordination

77 Pages Posted: 21 Feb 2014 Last revised: 13 Jun 2016

See all articles by Huining Henry Cao

Huining Henry Cao

Cheung Kong Graduate School of Business

Yuan Ma

Independent

Dongyan Ye

Cheung Kong Graduate School of Business

Date Written: June 10, 2013

Abstract

We analyze how public disclosure of informed investors' trades results in manipulation, which in turn affects coordination and competition in a duopolistic setting. We show that disclosure always increases market efficiency but its effect on informed investors' profit is ambiguous. When informed investors have very imprecise information, disclosure makes them coordinate their trades, so their expected profits are higher. Moreover, an informed investor with very imprecise information would prefer competition in the presence of disclosure as he learns more from the other informed investor than the market maker and make more profits than he would obtain in a monopolistic market.

JEL Classification: G12, G14, G18, G19

Suggested Citation

Cao, Huining Henry and Ma, Yuan and Ye, Dongyan, Disclosure, Learning, and Coordination (June 10, 2013). First Annual Volatility Institute at NYU Shanghai (VINS) Conference - 2015. Available at SSRN: https://ssrn.com/abstract=2398722 or http://dx.doi.org/10.2139/ssrn.2398722

Huining Henry Cao (Contact Author)

Cheung Kong Graduate School of Business ( email )

Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China

Yuan Ma

Independent ( email )

Dongyan Ye

Cheung Kong Graduate School of Business ( email )

Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China

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