Liquidity and the strategic value of information
Year: 2024
Type: article
Abstract: In Kyle (1985), the ratio of fundamental variance to price impact measures the value of information to a monopolist strategic informed investor. We show that this same statistic provides an approximation for the value of information in a more general setting with multiple differentially informed investors, and estimate it using high-frequency stocks data. We find that the value of information rises during crises. The value of information is higher for large, growth, and momentum stocks. Its most dramatic spikes occur at the start of the Covid-19 pandemic and the financial crisis of 2008, when the Fed announces liquidity facilities.
Source: European Finance Review
DOI: 10.1093/rof/rfae040
Authors: Ohad Kadan, Asaf Manela
Institutions: Arizona State University, Washington University in St. Louis
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W4403633988