Abstract
We examine the strategies of different types of investors (the insider, the information follower, and the price follower) who have asymmetric information about future news events and how these strategies affect stock prices. We show that stock price jumps occur when the insider receives accurate inside information or a low expected news event happens. In addition, the stock trading volume increases when the insider has private information. Our empirical tests show that the trading volume is high before and after stock price jumps. In this model, the price follower is in a disadvantaged position, which can be alleviated by the competition between the insider and the information follower.
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