Abstract
Abstract In Kyle (1985), the ratio of fundamental variance to price impact measures the value of information to a monopolist strategic informed investor. We show that this same statistic provides an approximation for the value of information in a more general setting with multiple differentially informed investors, and estimate it using high-frequency stocks data. We find that the value of information rises during crises. The value of information is higher for large, growth, and momentum stocks. Its most dramatic spikes occur at the start of the Covid-19 pandemic and the financial crisis of 2008, when the Fed announces liquidity facilities.
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