When Informed Agents Disagree
I analyze the price informativeness of three informed parties' actions from 1994-2006. Consistent with their disparate environments, I find that insiders are more informative at longer (12-month) versus shorter (6-month) horizons, while analysts and transient institutions are only informative at shorter horizons. When inter-party disagreement exists, a party's informativeness is not only a function of its own strength, but also the collective weakness of its counterparts. Using FERC, PIN, synchronicity and industry delay measures as proxies for a firm's informational environment, I find that while insider signals are unconditionally most informative, they are only predictive of future returns when prices are inefficient with respect to firm-specific information. Conversely, analysts appear unable to take additional advantage of inefficient firm-specific environments, and only appear to be predictive of future returns when stock prices are uninformed with respect to industryspecific information. Finally, I find that the mandate of Reg FD appears to increase the power of insiders' actions, while decreasing those of their informed counterparts. This evidence suggests a decreased level of information asymmetry between individuals and professional investors, but not a lower aggregate of level of information asymmetry across the firm's informational environment.
dissertation or thesis