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Insider Trading without Normality

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Author Info
Rochet, Jean-Charles
Vila, Jean-Luc

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Abstract

The authors analyze the existence and uniqueness of equilibrium in a class of monopolistic rational expectations models. They show the equivalence between the Kyle (1985) model of inside trading where the insider observes the amount of noise trading and the Kyle (1989) model of informed speculation when there is one risk-neutral insider and many risk-neutral marketmakers. The authors show that in these two equivalent models: (1) there exists a unique equilibrium independently of the distribution of uncertainty; and (2) this equilibrium minimizes the expected gains of the informed agent under incentive compatibility constraints. They extend their results to a class of signalling games. Copyright 1994 by The Review of Economic Studies Limited.

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Publisher Info
Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 61 (1994)
Issue (Month): 1 (January)
Pages: 131-52
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Handle: RePEc:bla:restud:v:61:y:1994:i:1:p:131-52

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  1. Wassim Daher & Leonard J. Mirman, 2004. "Market structure and insider trading," Cahiers de la Maison des Sciences Economiques b04025, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
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  2. Jordi Caballe & Jozsef Sakovics, 2004. "Speculating against an overconfident market," ESE Discussion Papers 62, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
    Other versions:
  3. Antonio Bernardo & Kenneth Judd, 1997. "Efficiency of Asset Markets with Asymmetric Information," University of California at Los Angeles, Anderson Graduate School of Management 1130, Anderson Graduate School of Management, UCLA. [Downloadable!]
  4. Giovanni Cespa, 2003. "A Comparison of Stock Market Mechanisms," CSEF Working Papers 94, Centre for Studies in Economics and Finance (CSEF), University of Salerno, Italy. [Downloadable!]
    Other versions:
  5. Ariadna Dumitrescu, 2003. "Imperfect Competition and Market Liquidity with a Supply Informed Trader," UFAE and IAE Working Papers 591.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
  6. Georg Nöldeke & Thomas Tröger, 2005. "A Characterization of the Distributions That Imply Existence of Linear Equilibria in the Kyle-Model," Discussion Papers 43, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  7. Georg Nöldeke & Thomas Tröger, 2004. "On the Existence of Linear Equilibria in the Rochet-Vila Model of Market Making," Bonn Econ Discussion Papers bgse19_2004, University of Bonn, Germany. [Downloadable!]
  8. Giovanni Cespa, 2007. "Information Sales and Insider Trading with Long-lived Information," CSEF Working Papers 174, Centre for Studies in Economics and Finance (CSEF), University of Salerno, Italy. [Downloadable!]
  9. Säfvenblad, Patrik, 1997. "Lead-Lag Effects When Prices Reveal Cross-Security Information," Working Paper Series in Economics and Finance 189, Stockholm School of Economics. [Downloadable!]
  10. Gehrig, Thomas & Menkhoff, Lukas, 2003. "The use of flow analysis in foreign exchange: exploratory evidence," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-276, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
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  11. Wassim Daher & Leonard J. Mirman, 2004. "Cournot duopoly and insider trading with two insiders," Cahiers de la Maison des Sciences Economiques b04077, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
    Other versions:
  12. Georg Nöldeke & Thomas Tröger, 2001. "Existence of Linear Equilibria in the Kyle Model with Multiple Informed Traders," Bonn Econ Discussion Papers bgse1_2001, University of Bonn, Germany. [Downloadable!]
    Other versions:
  13. Ramdan Dridi & Laurent Germain, 2000. "Noise and Competition in Strategic Oligopoly," STICERD - Econometrics Paper Series /2000/395, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
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