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Market structure and insider trading

  • Daher, Wassim
  • Mirman, Leonard J.

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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Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 16 (2007)
Issue (Month): 3 ()
Pages: 306-331

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Handle: RePEc:eee:reveco:v:16:y:2007:i:3:p:306-331
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  1. Jain, Neelam & Mirman, Leonard J., 1999. "Insider trading with correlated signals," Economics Letters, Elsevier, vol. 65(1), pages 105-113, October.
  2. Hayne E. Leland., 1990. "Insider Trading: Should It Be Prohibited?," Research Program in Finance Working Papers RPF-195, University of California at Berkeley.
  3. 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.
  4. Creane, Anthony, 1994. "Experimentation with Heteroskedastic Noise," Economic Theory, Springer, vol. 4(2), pages 275-86, March.
  5. Jean-Charles Rochet & Jean-Luc Vila, 1994. "Insider Trading without Normality," Review of Economic Studies, Oxford University Press, vol. 61(1), pages 131-152.
  6. James Dow & Rohit Rahi, 1996. "Informed Trading, Investment and Welfare," Archive Working Papers 029, Birkbeck, Department of Economics, Mathematics & Statistics.
  7. 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.
  8. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
  9. 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.
  10. 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.
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