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Potential information leakage and implications on discretionary liquidity traders

Author

Listed:
  • Liu, Hong
  • Jiang, Ying
  • Zhou, Deqing
  • Wang, Wenjie
  • Wang, Yu

Abstract

A two-period framework has been constructed to examine the effects of potential information leakage on both the information and financial markets, where an informed agent is subject to post-disclosure requirements. As the probability of leakage increases, the informed agent becomes more compelled to exploit the information earlier, thereby making the early price more informative. However, the final price becomes less informative as the acquisition of information is discouraged. Discretionary liquidity traders would prefer the later period over the early one, and their discretion over timing demands further discourages the precision of information.

Suggested Citation

  • Liu, Hong & Jiang, Ying & Zhou, Deqing & Wang, Wenjie & Wang, Yu, 2025. "Potential information leakage and implications on discretionary liquidity traders," Pacific-Basin Finance Journal, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:pacfin:v:90:y:2025:i:c:s0927538x24003834
    DOI: 10.1016/j.pacfin.2024.102631
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    More about this item

    Keywords

    Strategic trading; Potential information leakage; Public disclosure;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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