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Secret and Overt Information Acquisition in Financial Markets

Author

Listed:
  • Yan Xiong
  • Liyan Yang
  • Tarun Ramadorai

Abstract

We study the observability of investors’ information-acquisition activities in financial markets. Improving observability leads to two strategic effects on information acquisition: (1) the pricing effect, which arises from interactions between investors and the market maker and can encourage or discourage information acquisition, and (2) the competition effect, which concerns interactions among investors and always encourages information acquisition. We apply our theory to study voluntary and mandatory disclosures of corporate site visits. When the competition effect dominates, investors voluntarily disclose their visits. When the pricing effect dominates, mandatory disclosure is effective. Our analysis sheds novel light on Regulation Fair Disclosure.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Yan Xiong & Liyan Yang & Tarun Ramadorai, 2023. "Secret and Overt Information Acquisition in Financial Markets," The Review of Financial Studies, Society for Financial Studies, vol. 36(9), pages 3643-3692.
    • Handle: RePEc:oup:rfinst:v:36:y:2023:i:9:p:3643-3692.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhad018
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    More about this item

    JEL classification:

    • 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
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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