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Insider behavior under different market structures: experimental evidence on trading patterns, manipulation, and profitability

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  • Philipp Hornung

    ()

  • Ulrike Leopold-Wildburger

    ()

  • Roland Mestel

    ()

  • Stefan Palan

    ()

Abstract

We conduct laboratory experiments incorporating different market structures and insiders who compete with imperfectly informed traders. The insiders possess perfect information regarding the fundamental value of the tradable asset, whereas the imperfectly informed participants receive a noisy signal of fundamental value. In addition to the two trader types, we vary the market design by using either a stand-alone continuous double auction market or a continuous double auction market preceded by either a transparent or a nontransparent opening call auction. The results provide insights into whether and how insiders try to stay undetected, how their profits are accumulated and what market structures are advantageous for insiders. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Philipp Hornung & Ulrike Leopold-Wildburger & Roland Mestel & Stefan Palan, 2015. "Insider behavior under different market structures: experimental evidence on trading patterns, manipulation, and profitability," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 23(2), pages 357-373, June.
  • Handle: RePEc:spr:cejnor:v:23:y:2015:i:2:p:357-373
    DOI: 10.1007/s10100-014-0359-2
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    References listed on IDEAS

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    Cited by:

    1. Thomas Stöckl & Stefan Palan, 2018. "Catch me if you can. Can human observers identify insiders in asset markets?," Working Paper Series, Social and Economic Sciences 2018-01, Faculty of Social and Economic Sciences, Karl-Franzens-University Graz.
    2. Jürgen Fleiß & Stefan Palan, 2015. "Collaborative decision systems in economics and in complex societal and environmental applications," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 23(2), pages 279-282, June.

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