Insider Trading and the Announcement of Forecasted Stock Value

Security firms continuously update and announce forecasted value of corporate stocks. This paper provides one possible explanation for the announcement of the forecasted stock value, together with the effect of the announcement. With a model similar to that of Kyle (1985), it is shown that the announcement reduces the information rent of the insider and accordingly, the loss of the noise traders. It is shown, however, that the trading volume does not change with the announcement of the forecasted stock value.