Skip Navigation



RFS Advance Access published online on October 15, 2003
Review of Financial Studies, doi:10.1093/rfs/hhg047
Review of Financial Studies © The Society for Financial Studies 2003; all rights reserved
This Article
Right arrow Full Text (Accepted Manuscript)
Right arrow All Versions of this Article:
17/2/295    most recent
hhg047v1
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Mendelson, H.
Right arrow Articles by Tunca, T. I.
Right arrow Search for Related Content
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?


© 2003 The Society for Financial Studies

Original Articles

Strategic Trading, Liquidity and Information Acquisition

Haim Mendelson 1* and Tunay I. Tunca 1
1 Graduate School of Business, Stanford University, Stanford, CA 94305-5105

* To whom correspondence should be addressed. E-mail: haim{at}stanford.edu.


  Abstract

We study endogenous liquidity trading in a market with long-lived asymmetric information. We distinguish between public information, tractable information that can be acquired and intractable information that cannot be acquired. Besides information asymmetry and noise, the adverse-selection spread depends on the diffusion of intractable information and on the interest rate. With endogenous liquidity trading, efficiency is lower than that implied by noise-trading models. Liquidity traders benefit from the information released through the insider's trades in spite of their monetary losses. We study factors that affect the insider's information acquisition decision, including the amount of intractable information, observability and information acquisition costs.


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?


This article has been cited by other articles:


Home page
 REV FINANC STUDHome page
S. Cheng, V. Nagar, and M. V. Rajan
Insider Trades and Private Information: The Special Case of Delayed-Disclosure Trades
Rev. Financ. Stud., November 1, 2007; 20(6): 1833 - 1864.
[Abstract] [Full Text] [PDF]


Disclaimer: Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.