Market structure and insider trading
In this paper we examine the real and financial effects of two insiders trading in a static Jain-Mirman model (Henceforth JM). The first insider is the manager of the firm. The second insider is the owner. First, we study the change of the linear-equilibrium variables, in the presence of two insiders. Specifically, we show that the trading order and the real output of the manager are less in this model than in JM model. Secondly, we show that the stock price reveals more information than in Cournot duopoly and monopoly models studied by Jain-Mirman. Finally, we analyze the comparative statics (insiders' profits) of this model, when the market maker receives one or two signals.
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References listed on IDEAS
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- Michael Manove, 1989. "The Harm from Insider Trading and Informed Speculation," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 823-845.
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- Dow, J & Rahi, R, 1997.
"Informed Trading, Investment, and Welfare,"
Economics Working Papers
eco97/03, European University Institute.
- Leland, Hayne E, 1992.
"Insider Trading: Should It Be Prohibited?,"
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University of Chicago Press, vol. 100(4), pages 859-87, August.
- Holden, Craig W & Subrahmanyam, Avanidhar, 1992. " Long-Lived Private Information and Imperfect Competition," Journal of Finance, American Finance Association, vol. 47(1), pages 247-70, March.
- Creane, Anthony, 1994. "Experimentation with Heteroskedastic Noise," Economic Theory, Springer, vol. 4(2), pages 275-86, March.
- Leonard J. Mirman & Neelam Jain, 2000. "Real and financial effects of insider trading with correlated signals," Economic Theory, Springer, vol. 16(2), pages 333-353.
- Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
- Jain, Neelam & Mirman, Leonard J., 2002. "Effects of insider trading under different market structures," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(1), pages 19-39.
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