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Insider trading with public and shared information

Listed author(s):
  • Liu, Hong
  • Zhang, Zhixiang

We study the impact of public information and shared information on traders' trading behavior in the context of Kyle's (1985) speculative market. We suppose that there are four types of traders in our model: one insider, M outsiders, liquidity traders, and market makers. We explicitly describe the unique linear Nash equilibrium and find that public information harms the insider but benefits the outsiders and noise traders. Also, the market is more efficient because of the existence of public information.

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File URL: http://www.sciencedirect.com/science/article/pii/S026499931100068X
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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 28 (2011)
Issue (Month): 4 (July)
Pages: 1756-1762

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Handle: RePEc:eee:ecmode:v:28:y:2011:i:4:p:1756-1762
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. Jean-Charles Rochet & Jean-Luc Vila, 1994. "Insider Trading without Normality," Review of Economic Studies, Oxford University Press, vol. 61(1), pages 131-152.
  2. Leonard J. Mirman & Neelam Jain, 2000. "Real and financial effects of insider trading with correlated signals," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(2), pages 333-353.
  3. Daher, Wassim & Mirman, Leonard J., 2007. "Market structure and insider trading," International Review of Economics & Finance, Elsevier, vol. 16(3), pages 306-331.
  4. Luo, Shunlong, 2001. "The impact of public information on insider trading," Economics Letters, Elsevier, vol. 70(1), pages 59-68, January.
  5. Wang, Leonard F.S. & Wang, Ya-Chin & Ren, Shuang, 2009. "Stackelberg financial-leader in insider trading model," International Review of Economics & Finance, Elsevier, vol. 18(1), pages 123-131, January.
  6. Decamps, Jean-Paul & Lovo, Stefano, 2006. "Informational cascades with endogenous prices: The role of risk aversion," Journal of Mathematical Economics, Elsevier, vol. 42(1), pages 109-120, February.
  7. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
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