Abstract We study the effects of investor disagreement on informed trading by activist investors using high-frequency data derived from social network StockTwits. Greater leads to more activity subsequent day privately activists. Disagreement higher prices and improvements in measured liquidity, but these observed valuation market liquidity differences do not explain increase trading. Instead, ...

Exploiting the fact that insiders trade for a variety of reasons, we show that there is predictable, identifiable “routine” insider trading that is not informative for the future of firms. A portfolio strategy that focuses solely on the remaining “opportunistic” traders yields value-weighted abnormal returns of 82 basis points per month, while abnormal returns associated with routine traders ar...

Technological innovations such as high frequency trading systems (HFT) and algorithmic trading systems have changed financial markets. We discuss technological and economic aspects of HFT and find that HFT have a major impact on all aspects of the internal market structure of exchanges. We use market quality measures on a unique dataset provided by NASDAQ in order to analyze the contribution of...

We analyze a model in which traders have different trading opportunities and learn information from prices. The difference in trading opportunities implies that different traders may have different trading motives when trading in the same market—some trade for speculation and others for hedging—and thus they may respond to the same information in opposite directions. This implies that adding mo...

We study the evolution of trading in a market-maker trading system (SPAD) introduced to the Prague Stock Exchange in 1998. We find that the new system succeeded in increasing the transparency of the market, improved the price discovery function of the exchange, and that investors have benefited from lowered spreads. From this viewpoint, it may be an example for other markets where lack of trans...

The ability to buy “empty votes” by using derivative contracts to separate shares’ voting and cash flow rights is a cause of policy concern. We construct a formal model of a market for empty votes where informed and uninformed (and potentially biased) shareholders endogenously choose to demand or supply. There always exists an equilibrium where only informed shareholders demand votes, since uni...

We study the strategic interaction between fundamental informed trading and order-flow informed trading. In a standard two-period Kyle (1985) model, we add a “back-runner” who observes, ex post and potentially with noise, the order flow of the fundamental informed investor in the first period. Learning from orderflow information, the back-runner competes with the fundamental investor in the sec...

Empirical evidence suggests that information leakage in capital markets is common. We present a trading model to study the incentives of an informed trader (e.g., a well informed insider) to voluntarily leak information about an asset’s value to another independent trader. Our model shows that, while leaking information dissipates the insider’s information advantage about the asset’s value, it ...

We consider a dynamic asset pricing model with one asset, in which one informed trader trades against liquidity traders and competitive market makers. Informed trader has private information about the fundamental value of the asset as well as the exogenous demand shock on the market. We characterize the unique linear Markov equilibrium of the model. With just the private information about funda...