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The purpose of this paper is to examine the implications of asymmetric information for price evolution and investor behavior under a rational expectations framework.

The author presents a simple asymmetric information‐based asset‐pricing model to show that private information and its revelation can generate price momentum. To empirically test this implication of the model, Easley et al.'s probability of information‐based trade (PIN) is used as a proxy for private information.

High PIN firms are found to have larger magnitudes of momentum effect even after controlling for size. The abnormal returns are both economically and statistically significant, and cannot be explained by the Fama‐French factors.

This study provides both an information‐based theory to explain the momentum anomaly and empirical support for the theory.

The purpose of this paper is to examine the changes in the price impact of trades in the major Korean stock market following the introduction of disclosure to all traders of the top five brokers on the buy-side and the top five brokers on the sell-side of trades in real time for each stock in the KOSDAQ market.

The paper uses several alternative metrics for the price impact of trades. The study applies estimation methodology that accounts for the potential endogeneity of other market quality proxies, which are used as control variables in price impact regressions, by utilizing two-stage-least-square methods with fixed effect specification.

This study finds that the permanent price impact (information effect) of both buyer- and seller-initiated trades increases, which indicates that information is disseminated quicker in a transparent market. Uninformed trades have a larger permanent price impact than informed trades on both the buy and sell sides. The liquidity price effects are found to be mixed for buys and sells.

The study supports the current policy of the Korean Exchange to publicly display the five most active broker IDs on both the buy and sell sides, as it attracts both informed and liquidity traders, leading to faster price discovery in a more transparent market. However, a future study which analyzes the change in the market quality in both local markets would provide a complete picture of the effects of the policy.

Earlier studies documenting the effect of broker ID disclosure on market quality used effective spreads, market depth or order book imbalance as market quality measures. This study contributes to the existing literature by examining the changes in direct measures of the private information effect and liquidity effect of trades in a stock market – the Korean Stock Exchange – when the other part of the exchange (the KOSDAQ stock market) shifts to public broker ID transparency at the same transparency level.

This paper aims to investigate how user expectations affect value-added service (VAS) investment and pricing decisions of two-sided platforms. It draws on the information asymmetry theory and offers suggestions on how platform operators can manage user expectations.

According to the game theory, this study considers three user expectations (responsive, passive and wary). By framing the Hotelling duopoly model and comparing the VAS investment, price and platform profits, the optimal platform decision is analyzed and discussed.

The conclusions demonstrate that the monopolistic two-sided platform obtains more profits from the informed users with responsive expectations than uninformed users with passive or wary expectations. The marginal investment cost and cross-network externalities are two key factors that determine the platform's VAS investment and pricing strategies of passive or wary users. Furthermore, considering the expectation preferences, i.e. the uniformed users hold wary expectations with more information and hold passive expectations with less or no information, the results suggest that the proportion of wary users to all uninformed users increases the platform's VAS investment, profits and the price of informed users, and increase (decrease) the price of uninformed users when the cross-network externalities of informed users are relatively small (larger).

These results can provide insightful enlightenment into how platform operators utilize bilateral users' expectations and information level to guide their VAS investment and pricing decisions.

This paper is one of the first to explore the impact of three user expectations and the heterogeneity of preferences in informing users' passive or wary expectations, based on different levels of information on the decision-making of two-sided platforms regarding VAS.

Networks are natural tools for understanding social and economic phenomena. For example, all markets are characterized by agents connected by complex, multilateral information networks, and the network structure influences economic outcomes. In an earlier study, we undertook an experimental investigation of learning in various three-person networks, each of which gives rise to its own learning patterns. In the laboratory, learning in networks is challenging and the difficulty of solving the decision problem is sometimes massive even in the case of three persons. We found that the theory can account surprisingly well for the behavior observed in the laboratory. The aim of the present paper is to investigate important and interesting questions about individual and group behavior, including comparisons across networks and information treatments. We find that in order to explain subjects’ behavior, it is necessary to take into account the details of the network architecture as well as the information structure. We also identify some “black spots” where the theory does least well in interpreting the data.

The purpose of this paper is to examine the proposition that unexplained price and volume movements detected by the New Zealand Exchange's (“NZX”) surveillance staff reflect speculative trading.

The paper examines a sample of 98 price queries issued by the NZX between 1996 and 2004 where the company responded with a “no news” announcement to the NZX query. The sample is partitioned between queries of price increases and queries of price decreases. A market model is employed to estimate abnormal returns over the event window period [−30, 30] where day 0 is the date the price query is issued.

The paper finds evidence of large abnormal returns in the immediate pre‐query period but only a partial reversal in the post‐query period following the “no news” announcements.

The absence of a full reversal of the pre‐query abnormal return is interpreted as evidence that prices are being set by informed traders rather than by uninformed or speculative traders. Further research is required to determine whether this reflects breaches of either the continuous disclosure regime or insider trading regulations.

The paper presents the first systematic analysis of the NZX's price query system. The empirical results show that price movements that generate price queries and subsequent “no news” announcements should not be dismissed as mere speculation.

Product counterfeiting has been ubiquitously observed in various segments of the supply chain. The intrinsic values of brands create more opportunities for counterfeiting. The damaging reputation of such brands leaves them to deal with the fallouts of counterfeits. Hence, such companies address them mainly through legal action, price and quality strategy. However, consumer characteristics and the random distribution of counterfeit products to the consumer types affect the effectiveness of a counter strategy. This paper aims to generate insights on how to leverage digital technology to curb counterfeit entities with consideration of consumer characteristics and the random distribution of counterfeits to them.

The authors used game theory and vertical differentiation model to understand and encounter deceptive counterfeiting of brand products. The study understands the economic relationship between a brand product manufacturer and consumer types based on their awareness. Further, the authors have considered different cases in the model to gain useful insights.

The results reveal that when the consumers are proactive, informed and value-conscious brand product manufacturers take digital technology counterstrategy to earn the maximum revenue. Hence, this analysis highlights that the effectiveness of a counterstrategy critically depends on the consumer characteristics, whether they are proactive, informed or unaware.

The study outlines that brand product manufacturers must emphasize on the digital supply chain, product redesign and product tracking facility to empower informed and value-conscious and proactive consumers. Moreover, the government should take steps to create awareness among uninformed consumers via information campaigns.

This paper incorporates the role of consumers and brand product manufacturers to understand and address the deceptive counterfeiting issue.

Audit rotation (AR) is a key policy initiative implemented in global jurisdictions to deal with concerns about audit quality. Auditing financial reports involves communicating attested value-relevant company information to investors, and hence audit quality plays a role in the quality of financial reporting information. This paper aims to investigate whether AR affects the degree of information asymmetry (IS) between investors. It further aims to examine whether voluntary AR results in less asymmetric information compared to mandatory AR. Additionally, it examines whether political connections moderate the association between AR and IS.

The authors use data from publicly traded banks across the Gulf Cooperation Council (GCC) for the period 2010–2018. The authors include several variables to control for corporate governance and other firm-specific characteristics by using country-year fixed-effects regression model.

The authors find higher IS for banks that periodically rotate auditor, while banks voluntarily choose to rotate auditors obtain high-quality audits, which results in higher trading volume and lower stock return volatility, hence lower IS. The results suggest that when banks voluntarily choose to rotate auditors, investors perceive these banks as more committed to obtaining high-quality audits relative to mandatory AR. Providing higher quality audits enhances the credibility of reported information and thus reduce the level of IS. Moreover, IS following AR is higher for politically connected banks than for similar but politically unconnected banks. Finally, investors perceive voluntary AR as a disciplining tool, which mitigates IS. This mitigating role is not affected by bank political connectedness.

This study has limitations as the definition of AR could be interpreted as binary or too narrow, and hence it may not be appropriate to generalize findings to different contexts. Nonetheless, this study casts light on a new perspective to reconcile the existing mixed evidence on the influence of AR on IS and the moderating role of political connections. A further limitation is that because of data unavailability, the authors were unable to use other proxies (e.g. bid-ask spreads and analyst forecast dispersion) of IS.

The present findings provide insight to regulators, policymakers and standard setters on the potential adverse effect of political connections on the role of AR in mitigating IS. The results underscore the importance of voluntary AR, and suggest that regulators, policymakers and standard setters encourage firms to rotate their auditors periodically.

This study provides evidence in a setting that is unique at the economic, social and regulatory levels. Prior literature is lacking and has been centered on developed countries or focusing on single-country specifications. The data set of this study is unique and allows us to examine the interplay between political influence that arises through ownership and management roles of influential members of state.

This paper aims to propose a method of forecasting the level of informed trading at merger announcements by permitting liquidity traders to adjust their trading based upon signals from informed traders. Informed traders typically take advantage of their knowledge of forthcoming mergers by trading heavily at announcement. For cash mergers, they respond to a positive signal by purchasing stock, and for stock mergers, they respond to a negative signal by selling stock. In response, exchanges (market makers) set wider spreads (charge higher transaction fees) for informed buyers. Uninformed traders are subject to such excessive fees unless they can accurately predict the period during which such fees are charged.

This paper proposes a technique by which uninformed traders may make predictions by creating a vector autoregressive framework that links informed and liquidity trading through price changes.

For cash mergers, transaction fees remained excessive for days −1 to +1. For stock mergers, fees remained high on days −1 to +1, started declining on days 2 and 3, and vanished on days 4 and 5.

Most theoretical models of informed trading have viewed informed trading and liquidity trading as tangentially linked. This study finds a direct link between these two trading activities.

Uninformed traders may wish to limit their trading until after day +1 for both types of mergers.

This paper defines the time period during which transactions costs for traders are at the maximum level. Short sellers have more information about the direction of stock movements and may sell during days of informed selling set forth by this study and repurchase stock afterwards.

The currency crisis literature now comprises three main schools of thought; first‐generation models consider the depletion of foreign exchange reserves as a consequence of incompatible exchange rate and monetary policies. Second‐generation models are based on speculative theories whereby the belief of investors that monetary policy will be modified as a result of an attack makes the attack possible. Third‐generation models have been designed in an attempt to explain the nature of the Asian crises of 1997/1998. Each school of thought considers the nature of a speculative attack. However, this model uses a search framework to explain the timing of an attack in terms of an information externality in the foreign exchange market. It then assesses the efficacy of a Tobin tax in delaying and thereby possibly preventing such a crisis.

This study aims to explore the effects of political information and anger on the public's cognitive processing and foreign policy preferences concerning third‐party interventions in ethnic conflict.

The study employs an experimental design, wherein the authors manipulate policy‐specific information by generating ad hoc political information related to ethnic conflict. The statistical methods of analysis are logistic regression and analysis of covariance.

The results demonstrate that both political information and anger have a significant impact on an individual's cognitive processing and policy preferences regarding ethnic conflict interventions. Specifically, political information increases one's proclivity to choose non‐military policy options, whereas anger instigates support for aggressive policies. Both factors result in faster decision making with lower amounts of information accessed. However, the interaction of political information and anger is not significant. The study also finds that policy‐specific information – rather than general political information – influences the public's policy preferences.

This study confronts and advances the debate over whether political information is significant in influencing the public's foreign policy preferences and, if so, whether such an effect is the product of general or domain‐specific information. It also addresses an under‐studied topic – the emotive repercussions of ethnic conflicts among potential third‐party interveners. In addition, it tackles the argument over whether political information immunizes people against (or sensitizes them to) the effects of anger on their cognitive processing and foreign policy preferences. The study also introduces a novel approach for examining political information through an experimental manipulation of policy‐specific information.