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Securities Regulation, Economics Of

The economic analysis of securities regulation has focused primarily on two fundamental rules of securities regulation, disclosure obligations and insider trading restrictions. Scholars have also paid some attention to aspects of private litigation, such as the presumption of reliance, the shape of remedies, and investor insurance.

Disclosure Obligations

Imposing a disclosure obligation on corporations that issue securities to the investing public was among the earliest regulatory measures regarding securities. Economic analysis of the statistical effect of the disclosure obligation on securities' prices and their volatility came early and continues with increasing sophistication. Generally, the disclosure obligation or its expansion produces higher prices and reduced volatility. The consistently significant effect of disclosure obligations has been the improvement of market liquidity via the reduction of the bid-ask spread (that ...

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