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Insider trading, ethical attitudes and culture: an experimental market analysis

Author

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  • J.C. Gaa
  • S.M. Khalid Nainar
  • Mohamed Shehata

Abstract

Both the economic efficiency and ethical aspects of insider trading have had a great deal of attention for a number of years. This experimental study bridges the economic and ethics literature by addressing the issue of whether market participants respond only to economic factors, or whether non-economic (ethical) factors are also reflected in their behaviour. The experimental evidence indicates that subjects reacted in an economically rational fashion to the profit opportunities afforded by the possession of inside information and to the existence of a penalty. But they also tended to act in accordance with instructions not to use private information, and this behaviour appears to conflict with the widely held economic assumption that agents in a competitive market will exploit all legal opportunities to economic gain.

Suggested Citation

  • J.C. Gaa & S.M. Khalid Nainar & Mohamed Shehata, 2006. "Insider trading, ethical attitudes and culture: an experimental market analysis," International Journal of Business Governance and Ethics, Inderscience Enterprises Ltd, vol. 2(1/2), pages 84-100.
    • Handle: RePEc:ids:ijbget:v:2:y:2006:i:1/2:p:84-100
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    Cited by:

    1. Robert Merl, 2021. "Literature Review of Experimental Asset Markets with Insiders," Working Paper Series, Social and Economic Sciences 2021-04, Faculty of Social and Economic Sciences, Karl-Franzens-University Graz.
    2. Merl, Robert, 2022. "Literature review of experimental asset markets with insiders," Journal of Behavioral and Experimental Finance, Elsevier, vol. 33(C).

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