The Asymmetric Private Information Mask: Informed Trading in Takeovers

The U.S. Securities and Exchange Commission (SEC) has increased the regulation of asymmetric information-based trading, aiming to mitigate disclosure of material private information to select market participants. These efforts have not been fully successful, raising questions about the impact of asymmetric information on private equity trades, informed trades, and expected gains. The integrity of competing market structures and market makers’ rent has heightened the need to understand and measure the cost components of the market maker bid-ask spread. Whether the existence of private information in takeovers through selective disclosure is harmful to financial markets is still uncertain. Inside information is … Read more