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Insider Trading Controversies: A Literature Review

Author

Listed:
  • Utpal Bhattacharya

    (Department of Finance, HKUST Business School, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong)

Abstract

Using the artifice of a hypothetical trial, this article presents the cases for and against insider trading. Both sides in the trial produce as evidence the salient points made in more than 100 years of literature on insider trading. The initial days of the trial focus on the issues raised in the law literature such as fiduciary responsibility, the misappropriation theory, and the fairness and integrity of markets; however, the trial soon transfers focus to issues such as Pareto optimality, efficient contracting, market efficiency, and predictability raised in the financial economics literature. Open issues are then brought up. A jury finally hands down its verdict.

Suggested Citation

  • Utpal Bhattacharya, 2014. "Insider Trading Controversies: A Literature Review," Annual Review of Financial Economics, Annual Reviews, vol. 6(1), pages 385-403, December.
    • Handle: RePEc:anr:refeco:v:6:y:2014:p:385-403
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-financial-110613-034422
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    More about this item

    Keywords

    insider trading; securities law; enforcement; efficient markets; cost of capital; liquidity;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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