Topic: Manipulation, Coordination and Competition
Speaker: Huining Henry Cao, Professor of Finance, Cheung Kong Graduate School of Business
Date: December 4, 2013 (Wed.)
Time: 1:00-2:30pm
Location: Building 4, Room 101
Language: English/Chinese
Abstract:
We analyze how public disclosure of informed investors' trades results in manipulation, which in turn affects coordination and competition among informed investors in a duopolistic setting. Under disclosure requirement, an informed trader's order flow consists of two components: an information-based component to profit and a random component to manipulate. The random components from all informed traders collectively equals, in distribution, the random orders from all liquidity traders. Market is more efficient with disclosure. When each informed investor have very imprecise information, disclosure helps to coordinate trading among informed investors and they make more expected profits compared to what they expect in a market without disclosure. Moreover, an informed investor would prefer competition in the presence of disclosure as each informed investor makes more expected profits than he would obtain in a monopolistic market.
About the speaker:
Professor Cao is Professor of Finance and the Area Head of the Finance Group at CKGSB. He earned his Ph.D. in Finance in 1995 from UCLA, and in Pathology in 1991 from Yale University. Before joining Cheung Kong GSB, Dr. Cao taught at UC Berkeley and UNC Chapel Hill. His work has been widely published in various academic journals including Journal of Finance, Review of Financial Studies, Journal of Financial Economics, Journal of Economic Theory, Journal of Business and Review of Finance. Dr. Cao is the Co-editor of International Financial Review and is on the editorial board of Annals of Economics and Finance and China Financial Review. He also received numerous awards for teaching and research excellence including nominations for the Smith Breeden Award in 1998 and 2000 for the best paper published in the Journal of Finance.
