We use a rational expectations model to examine how public disclosure requirements affect listing decisions by rent-seeking corporate insiders, and allocation decisions by liquidity traders seeking to minimize trading costs. We find that exchanges competing for trading volume engage in a...

This paper analyzes whether competition between stock exchanges for volume leads to a deterioration of disclosure requirements imposed by those exchanges on listing firms. The model shows that trading concentrates on the high disclosure exchange, prompting exchanges to engage in a quot;race for...

Evidence contrasting U.S. insider trades in high- and low-jeopardy periods and across firms at high and low risk for 10b-5 litigation indicates that insiders condition their trades on foreknowledge of price-relevant public disclosures, but avoid profitable trades when the jeopardy associated...

In large part, the form of investment advisers' compensation contracts is imposed by the Securities and Exchange Commission. Given these contractual forms, this paper considers the portfolio choices that emerge when advisers rationally cultivate their reputations. In a two-period model of...

This paper examines a two-period model of investment management. Investors reallocate their wealth between two mutual funds managed by different investment advisers after observing the performance of each adviser in the first period. A reputation effect causes one adviser to use his private...

This paper examines the valuation of employee stock options (ESOs). Because ESOs are inalienable, the employee's optimal exercise policy differs from the policy a naive reading of the finance literature would suggest. The employee prefers to exercise options before maturity under certain...

Regulation requiring insiders to publicly disclose their stock trades after the fact complicates the trading decisions of informed, rent-seeking insiders. Given this requirement, we present an insider's equilibrium trading strategy in a multiperiod rational expectations framework. Relative to...

Regulation requiring insiders to publicly disclose their stock trades after the fact complicates the trading decisions of informed, rent-seeking insiders. Given this requirement, we present an insider's equilibrium trading strategy in a multiperiod rational expectations framework. Relative to...

We examine the stock option exercise decisions of over 50,000 employees at seven corporations to provide evidence on the distribution of price-relevant non-public information among employees. When option exercise (adjusted for other factors affecting exercise) is low, stock returns in the coming...

We investigate stock option exercise decisions by over 50,000 employees at seven corporations. Controlling for economic factors, psychological factors in*uence exer- cise. Consistent with psychological models of beliefs, employees exercise in response to stock price trends|exercise is positively...