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Some Remarks on Leland's Model of Insider Trading

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  • Repullo, R.

Abstract

This paper shows that Leland's (1992) results on the positive effects of insider trading on investment are not robust to the introduction of noise in the insider’s information. The paper then considers two variations of his model in which the insider is risk neutral (to ensure robustness), and the investment decision is prior to the placing of the stock in the market. It is shown that if insider trading takes place in the primary market, it has no effect on the level of investment, whereas if it takes place in the secondary market, it has a negative effect on investment.
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(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Repullo, R., 1994. "Some Remarks on Leland's Model of Insider Trading," Papers 9425, Centro de Estudios Monetarios Y Financieros-.
    • Handle: RePEc:fth:cemfdt:9425
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    Cited by:

    1. Sudipto Bhattacharya & Giovanna Nicodano, 2001. "Insider Trading, Investment, and Liquidity: A Welfare Analysis," Journal of Finance, American Finance Association, vol. 56(3), pages 1141-1156, June.
    2. Dimitri Vayanos & Jiang Wang, 2012. "Market Liquidity -- Theory and Empirical Evidence," NBER Working Papers 18251, National Bureau of Economic Research, Inc.
    3. Chi-Wen Lee & Zemin Lu, 2008. "Trading on inside information when there may be tippees," Review of Quantitative Finance and Accounting, Springer, vol. 31(3), pages 241-260, October.
    4. Bhattacharya, Sudipto & Nicodano, Giovanna, 1999. "Insider Trading, Investment and Liquidity," CEPR Discussion Papers 2251, C.E.P.R. Discussion Papers.

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    Keywords

    INVESTMENTS; ECONOMIC MODELS;

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