Is news really news? The effects of selective disclosure regulations Abstract. Before regulations were enacted to prevent such practices, information leaked through selective disclosure was incorporated into markets prior to

Link: academic.oup.com/rof/article/...

PS FAQ: “Wasn’t insider trading illegal long before 2001?” Yes. Trading on inside info has been illegal for decades. What changed is that selectively giving material nonpublic info to outsiders (who might then trade) became a problem for *the firm* under fair-disclosure rules.

TL;DR: Fair disclosure made news days matter again. Prices now jump around when the news is public, not when it’s whispered.

3. Show that fair-disclosure rules re-centered information release on public announcements, nudging markets, by design, to *reduce* efficiency from “strong-form” toward "semi-strong-form" efficiency.

2. Unify familiar empirical proxies (R², idiosyncratic vol, mean-absolute deviations, turnover) under one coherent, model-based measurement of informed trading, yielding a cleaner, better-scaled metric across time and markets.

Along the way, we:

1. Generalize Kyle (1985) to a noisy private signal so the binary distinction of “informed vs. uninformed” becomes a continuum of informedness.

One implication: a lot of finance/accounting work that leans on “news days” (especially earnings announcements) pre-2001 deserves re-evaluation, as “news days” weren’t truly news.

Before that, “news” often wasn’t news: material info leaked to favored listeners, got traded on privately, compounded into prices, and by announcement time… there was little left to move.

What changed? Regulation. The U.S. adopted Regulation Fair Disclosure (Reg FD) around 2001, and Europe followed with the Market Abuse Directive (MAD) around 2005. These rules prohibit selective briefings of outsiders.

Translation: after those dates, news days started to matter a lot more for firm-specific prices, and markets started behaving the way Roll expected.

We track the gap between news-day and non-news-day firm-specific volatility across four markets (U.S., Europe, Japan, Australia), 1980–2018. The gap jumps ~5× in the U.S. around 2001 and in Europe around 2005, but is flat in Japan and Australia.

Enter our paper.

Back in 1988, Richard Roll pointed to a puzzle: stock returns on news days didn’t look much different from non-news days. If public announcements move prices and non-news is mostly noise, why weren’t announcement days much more volatile? The “R² puzzle” was born and lingered for decades.

Story time! Let’s celebrate winning the Review of Finance 2025 Best Investment Paper Award with a story about insider trading, a classic puzzle, financial regulation, news, and the differences between U.S./Europe and Japan/Australia.

Given that AI can do it so well, I’m guessing human researchers could have been doing it just as well for some time, as in Novy-Marx 2014 🙃

Cool results that raise interesting questions about a swath of asset pricing papers. Also really like the assaying framework they use.

An academic paper has excellent empirical evidence & hypotheses that perfectly match the patterns in the data.

One catch: AI wrote the hypotheses after seeing the results.

Should this matter?

New paper w/ Robert Novy-Marx on AI-Powered (Finance) Scholarship🧵

papers.ssrn.com/sol3/papers....

Still trying to figure it out: can you explain the broad-based practical application of Gold and why Fort Knox exists?

Few people even know about this; when people are asked in surveys how child mortality has changed the majority says it has stagnated or increased.

If you consider that many don't know about humanity's biggest achievement, then it's not surprising that many are so pessimistic about our future.

שלום,
network effects

If you resort to claiming lack of knowledge on my side without knowing pretty much anything about me, I'd say there's a bit of smugness problem going on...

There's a difference in your mind ("how things should be"); not in reality ("how things are").

Alternatively, those other oligarchs were putting it in the service of the previous ruling party, as the media-politics nexus worked for millennia.

Who are they buying them from, Filipe?

את יכולה לייצר פיד משלך, שמחקה את הפיד הראשי אבל מכבה ריטוויטים של יוזר ספציפי.

SkyFeed is your friend.

#פידכלכלה

ועכשיו, עם הפיד מצורף!

bsky.app/profile/did:...

#פידכלכלה

ככה, שיהיה.

Glad I found you in this new place, Todd. Your signal to noise ratio is unreal.

Yeah, the starter packs are great! Just discovered them yesterday :)

Thanks!