Some Remarks on Leland's Model of Insider Trading
AbstractThis paper shows that Leland's (1992) results on the positive effects of insider trading on investment are not robust to the introduction of noise in the insider's information. The paper then considers two variations of his model in which the insider is risk neutral (to ensure robustness), and the investment decision is prior to the placing of the stock in the market. It is shown that if insider trading takes place in the primary market, it has no effect on the level of investment, whereas if it takes place in the secondary market, it has a negative effect on investment. Copyright 1999 by The London School of Economics and Political Science
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Bibliographic InfoPaper provided by Centro de Estudios Monetarios Y Financieros- in its series Papers with number 9425.
Length: 27 pages
Date of creation: 1994
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Postal: Centro de Estudios Monetarios Y Financieros. Casado del Alisal, 5-28014 Madrid, Spain.
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- Muendler, Marc-Andreas, 2008. "Risk-neutral investors do not acquire information," Finance Research Letters, Elsevier, vol. 5(3), pages 156-161, September.
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