The Value of Information: A Puzzle
Fuente:
arXiv
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| Autores principales: | , |
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| Formato: | Preprint |
| Publicado: |
2026
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| _version_ | 1866911672269012992 |
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| author | Kadan, Ohad Manela, Asaf |
| author_facet | Kadan, Ohad Manela, Asaf |
| contents | We show that under mild assumptions, the total value of information to informed traders in the market can be measured by the covariance between price changes and order flow. This covariance captures noise trader losses, which equal informed trader gains when market making is competitive. We estimate the value of information using high frequency data on US equities at about $3.5 million per year for the average stock. The aggregate value of information is about 0.04% of market cap, which is considerably lower than the 0.67% in fees investors pay each year searching for superior returns (French 2008). We discuss potential resolutions for these puzzling findings. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2605_11180 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | The Value of Information: A Puzzle Kadan, Ohad Manela, Asaf General Finance General Economics Economics Trading and Market Microstructure We show that under mild assumptions, the total value of information to informed traders in the market can be measured by the covariance between price changes and order flow. This covariance captures noise trader losses, which equal informed trader gains when market making is competitive. We estimate the value of information using high frequency data on US equities at about $3.5 million per year for the average stock. The aggregate value of information is about 0.04% of market cap, which is considerably lower than the 0.67% in fees investors pay each year searching for superior returns (French 2008). We discuss potential resolutions for these puzzling findings. |
| title | The Value of Information: A Puzzle |
| topic | General Finance General Economics Economics Trading and Market Microstructure |
| url | https://arxiv.org/abs/2605.11180 |