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

The SEC’s September Enforcement Spike

The Securities and Exchange Commission (SEC) periodically reports on its performance to the public and Congress, emphasizing metrics such as the number of enforcement actions (“cases”) filed (see, e.g., SEC, 2018, 2020). Former co-directors of the Division of Enforcement acknowledge the potential dangers of focusing on quantitative measurements: “the raw number of cases filed or the total amounts of fines and penalties assessed during an arbitrary time period such as a single fiscal year—cannot adequately measure the effectiveness of an enforcement program…[and] can result in a misalignment of incentives and objectives” (SEC 2018). We examine this concern by testing whether … Read more