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Insider trading and government intervention

Author

Listed:
  • Li, Zhihua
  • Liu, Hong
  • Yang, Qingshan

Abstract

This paper studies an insider trading model with government intervention aiming to stabilize price volatility, in one-period and multi-period scenarios. In a single-period model, we identify a threshold for the strength of government intervention that determines the interplay among market characteristics contingent on whether this threshold is exceeded or not. Furthermore, we find that government intervention effectively stabilizes price fluctuation in the multi-period model. Meanwhile, the insider adopts alternating increasing trading strategies (V-shaped) while the government adopts corresponding hedging strategies. Finally, empirical analysis is used to verify the effectiveness of government intervention.

Suggested Citation

  • Li, Zhihua & Liu, Hong & Yang, Qingshan, 2025. "Insider trading and government intervention," International Review of Economics & Finance, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:reveco:v:101:y:2025:i:c:s1059056025002679
    DOI: 10.1016/j.iref.2025.104104
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    More about this item

    Keywords

    Insider trading; Price stability; Hedging strategy; Price disclosure; Government intervention;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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