Strategic Trading and Delayed Disclosure by Informed Traders
Author | : Erfan Danesh |
Publisher | : |
Total Pages | : 41 |
Release | : 2016 |
ISBN-10 | : OCLC:1306244018 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Strategic Trading and Delayed Disclosure by Informed Traders written by Erfan Danesh and published by . This book was released on 2016 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: The current SEC regulation section 13(f) allows financial institutions to delay the disclosure of their quarter-end stock holdings up to 45 days. Motivated by a recent regulatory debate about the appropriate length of delay for disclosures, I develop a model to examine a financial institution's optimal response in different regulatory environments in terms of permitted delay. I show that an institution with access to better information about stocks optimally chooses to delay filing its disclosure for as long as permitted by the regulations. I demonstrate that this forbearance results in higher levels of profits for the financial institution relative to the case with immediate disclosure. Furthermore, delayed disclosure has nuanced implications on market quality: while longer delays by financial institutions with access to private information render the markets less liquid, they result in prices that are more reflective of the fundamentals.