Best Paper - Volume 4
The
D. P. Jacobs Prize for the most significant paper in Volume 4 of the Journal
of Financial Intermediation has been awarded to Michael J. Fishman and
Kathleen M. Hagerty for "The Incentive to Sell Financial Market
Information" published in Volume 4, Issue 2. The prize carries with it a
$5,000 check for the winners
The Incentive to Sell Financial Market Information
Michael J. Fishman and Kathleen M. Hagerty
Kellogg Graduate School of Management, Northwestern University
2001 Sheridan Road, Evanston, IL 60208
Abstract
Investment
advisory firm and brokerage firms hire analysts to uncover profitable securities
investment opportunities. Then these firms sell the information (either directly
or indirectly) to others. Why? Given that the information has value, why do
these firms not keep the information to themselves and trade solely for their
own accounts? Because of competition, information is more valuable when fewer
people trade on the information. This paper shows that selling information is a
strategic response by competing informed traders. Specifically, it is a means
for informed traders to commit to trade aggressively, thereby, inducing other
informed traders to trade less aggressively. Journal of Economic Literature Classification Numbers: G10, D82. ©1995 Academic Press, Inc.
