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

Why Do Retail Investors Ignore Accounting Information?

Prior research finds that individual (retail) investors often fail to use accounting information when making stock trading decisions. Instead, many individuals underperform by trading on attention-grabbing technical trends such as high past stock returns.

A number of Securities and Exchange Commission (SEC) regulations are designed to help individual investors make better trading decisions by reducing their costs of using accounting information. For example, part of the SEC’s motivation for recent regulations on hyperlinking and XBRL was to aid individuals by reducing their costs of monitoring and accessing firms’ accounting reports. In a recent study, we investigate why many individual investors … Read more