Abstract: | This article analyzes the effects of information leakage ontrading behavior and market efficiency. A trader who receivesa noisy signal about a forthcoming public announcement can exploitit twice. First, when he receives it, and second, after thepublic announcement since he knows best the extent to whichhis information is already reflected in the pre-announcementprice. Given his information he expects the price to overshootand intends to partially revert his trade. While informationleakage makes the price process more informative in the short-run,it reduces its informativeness in the long-run. The analysissupports Securities and Exchange Commission's Regulation FairDisclosure. |