Trading Against the Random Expiration of Private Information: A Natural Experiment

56 Pages Posted: 1 Jan 2015 Last revised: 21 Mar 2019

See all articles by Mohammadreza Bolandnazar

Mohammadreza Bolandnazar

Columbia University - Columbia Business School

Robert J. Jackson, Jr.

Professor of Law

Wei Jiang

Columbia Business School - Finance and Economics

Joshua Mitts

Columbia Law School

Date Written: July 22, 2018

Abstract

For years, the SEC accidentally distributed securities disclosures to some investors before the public. This setting is unique because the delay until public disclosure was exogenous and the private information window was well-defi ned, which we exploit to study informed trading with a random stopping time. Trading intensity and the pace at which prices incorporate information decrease with the expected delay until public release, but the relation between trading intensity and time elapsed varies with traders' learning process. Noise trading and relative information advantage play similar roles as in standard microstructure theories assuming a fixed time window.

Keywords: Private information; information dissemination; informed trading

JEL Classification: G14, G28

Suggested Citation

Bolandnazar, Mohammadreza and Jackson, Jr., Robert J. and Jiang, Wei and Mitts, Joshua, Trading Against the Random Expiration of Private Information: A Natural Experiment (July 22, 2018). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2544128 or http://dx.doi.org/10.2139/ssrn.2544128

Mohammadreza Bolandnazar

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Robert J. Jackson, Jr.

Professor of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

Wei Jiang (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States
(212) 854-5553 (Phone)

Joshua Mitts

Columbia Law School ( email )

435 West 116th Street
New York, NY 10025
United States

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