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Market structure and insider trading

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  • Daher, Wassim
  • Mirman, Leonard J.

Abstract

In this paper we examine the real and financial effects of two insiders trading in a static Jain-Mirman model (Henceforth JM). The first insider is the manager of the firm. The second insider is the owner. First, we study the change of the linear-equilibrium variables, in the presence of two insiders. Specifically, we show that the trading order and the real output of the manager are less in this model than in JM model. Secondly, we show that the stock price reveals more information than in Cournot duopoly and monopoly models studied by Jain-Mirman. Finally, we analyze the comparative statics (insiders' profits) of this model, when the market maker receives one or two signals.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 16 (2007)
Issue (Month): 3 ()
Pages: 306-331

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Handle: RePEc:eee:reveco:v:16:y:2007:i:3:p:306-331

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Web page: http://www.elsevier.com/locate/inca/620165

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References

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  1. Rochet, Jean-Charles & Vila, Jean-Luc, 1994. "Insider Trading without Normality," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 61(1), pages 131-52, January.
  2. James Dow & Rohit Rahi, 1996. "Informed Trading, Investment and Welfare," Archive Working Papers, Birkbeck, Department of Economics, Mathematics & Statistics 029, Birkbeck, Department of Economics, Mathematics & Statistics.
  3. Holden, Craig W & Subrahmanyam, Avanidhar, 1992. " Long-Lived Private Information and Imperfect Competition," Journal of Finance, American Finance Association, American Finance Association, vol. 47(1), pages 247-70, March.
  4. Jain, Neelam & Mirman, Leonard J., 2002. "Effects of insider trading under different market structures," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 42(1), pages 19-39.
  5. Hayne E. Leland., 1990. "Insider Trading: Should It Be Prohibited?," Research Program in Finance Working Papers, University of California at Berkeley RPF-195, University of California at Berkeley.
  6. Creane, Anthony, 1994. "Experimentation with Heteroskedastic Noise," Economic Theory, Springer, Springer, vol. 4(2), pages 275-86, March.
  7. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, Econometric Society, vol. 53(6), pages 1315-35, November.
  8. Leonard J. Mirman & Neelam Jain, 2000. "Real and financial effects of insider trading with correlated signals," Economic Theory, Springer, Springer, vol. 16(2), pages 333-353.
  9. Jain, Neelam & Mirman, Leonard J., 1999. "Insider trading with correlated signals," Economics Letters, Elsevier, vol. 65(1), pages 105-113, October.
  10. Manove, Michael, 1989. "The Harm from Insider Trading and Informed Speculation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 104(4), pages 823-45, November.
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Cited by:
  1. repec:hal:journl:halshs-00653971 is not listed on IDEAS
  2. Wang, Leonard F.S. & Wang, Ya-Chin & Ren, Shuang, 2009. "Stackelberg financial-leader in insider trading model," International Review of Economics & Finance, Elsevier, Elsevier, vol. 18(1), pages 123-131, January.
  3. Wassim Daher & Harun Aydilek & Fida Karam & Asiye Adydilek, 2012. "Insider trading with product differentiation," Documents de travail du Centre d'Economie de la Sorbonne, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne 12014, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  4. Wassim Daher & Fida Karam, 2011. "Insider Trading in a Two-Tier real market structure model," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00653971, HAL.
  5. Wassim Daher & Leonard J. Mirman, 2004. "Cournot duopoly and insider trading with two insiders," Cahiers de la Maison des Sciences Economiques, Université Panthéon-Sorbonne (Paris 1) b04077, Université Panthéon-Sorbonne (Paris 1).
  6. Cheng, Louis T.W. & Davidson III, Wallace N. & Leung, T.Y., 2011. "Insider trading returns and dividend signals," International Review of Economics & Finance, Elsevier, Elsevier, vol. 20(3), pages 421-429, June.
  7. Liu, Hong & Zhang, Zhixiang, 2011. "Insider trading with public and shared information," Economic Modelling, Elsevier, vol. 28(4), pages 1756-1762, July.
  8. repec:hal:journl:halshs-00676502 is not listed on IDEAS
  9. Mirman, Leonard J. & Salgueiro, Egas M. & Santugini, Marc, 2014. "Noisy signaling in monopoly," International Review of Economics & Finance, Elsevier, Elsevier, vol. 29(C), pages 504-511.
  10. Wassim Daher & Fida Karam & Leonard J. Mirman, 2011. "Insider Trading with Different Market Structures," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00639657, HAL.
  11. Park, Young S. & Lee, Jaehyun, 2010. "Detecting insider trading: The theory and validation in Korea Exchange," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2110-2120, September.
  12. Leonard F.S. Wang & Ya-Chin Wang, 2010. "Stackelberg real-leader in an insider trading model," Studies in Economics and Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 27(1), pages 30-46, March.
  13. Selim Tuzunturk, 2009. "The relationship between volatility and volume on the Istanbul stock exchange," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 1(3), pages 289-304.

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