Insider Trading in a Two-Tier real market structure model

Wassim Daher and Fida Karam (karam@gust.edu.kw)
Additional contact information
Fida Karam: GUST - Gulf University for Science and Technology

Post-Print from HAL

Abstract: In this paper, we study the real and financial effects of insider trading in the spirit of Jain and Mirman (1999). Unlike the previous works that address this issue, we suppose that the production of the real good is costly and depends mainly of the price of an intermediate good produced locally by a privately-owned firm. We show that the real output of the final good chosen by the insider as well as the price of the intermediate good set by the privately-owned firm are both greater than it would be in the absence of insider trading. Furthermore, the parameters of both real markets affect the stock price and the stock pricing rule. Besides, when compared to Jain and Mirman (2000) and (2002), this two-tier real market structure does not alter the amount of information disseminated in the stock price or the level of insider trading. Next, we add a second insider to the model. We show that competition in the financial sector decreases the level of output produced by firm 1 and the price of the intermediate good with respect to initial model. Moreover, it affects the insiders' trades and increases the amount of information revealed in the stock price.

Keywords: Kyle model; correlated signals; Insider trading; Two-Tier market; Stackelberg; signaux corrélés; modèle de Kyle; Stakelberg; Initié (search for similar items in EconPapers)
Date: 2011-10
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00653971
References: Add references at CitEc
Citations:

Published in 2011

Downloads: (external link)
https://shs.hal.science/halshs-00653971/document (application/pdf)

Related works:
Journal Article: Insider trading in a two-tier real market structure model (2013)
Working Paper: Insider Trading in a Two-Tier real market structure model (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00653971

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD (hal@ccsd.cnrs.fr).