When Disclosure Isn’t Enough: Evidence on Cursedness in Betting Markets

Capital market regulation often relies on two methods: imposing restrictions on the actions of parties with private information and requiring greater transparency about these actions. The U.S. Securities and Exchange Commission’s (SEC) recent proposal targeting insider trading abuses follows this paradigm, similar to other proposals related to share repurchases and short selling. The insider trading proposal looks to add restrictions on insiders’ ability to use and trade on Rule 10b5-1 plans, plus enhanced disclosures. In a recent working paper, we use a setting analogous to capital markets to provide evidence that greater disclosure of insider trading is likely to have … Read more

Public Information and Capital Flows: Evidence from a Betting Market

What are the consequences of increasing public information in a market of risk-seeking participants? Academics and policy makers alike are grappling with this question following the influx of speculative capital flows from individual investors in financial markets. As platforms such as Robinhood take root, the influence of gambling behavior is likely to increase and further affect the functioning of markets. The topic is also a key policy issue in light of the Securities and Exchange Commission (SEC) plan to review new policies aimed at increasing transparency to address market developments such as the frenzy of trading in “meme” stocks like … Read more