The Incentive to Sell Financial Market Information

JOURNAL OF FINANCIAL INTERMEDIATION, Vol 4 No 2

Posted: 25 Aug 1998

Abstract

Investment advisory firms 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.

JEL Classification: G10, D82

Suggested Citation

Fishman, Michael Jay and Hagerty, Kathleen M., The Incentive to Sell Financial Market Information. JOURNAL OF FINANCIAL INTERMEDIATION, Vol 4 No 2, Available at SSRN: https://ssrn.com/abstract=6546

Michael Jay Fishman (Contact Author)

Kellogg School of Management - Department of Finance ( email )

Evanston, IL 60208
United States
847-491-8332 (Phone)
847-491-5719 (Fax)

Kathleen M. Hagerty

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8345 (Phone)
847-491-5719 (Fax)

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