Some Remarks on Leland's Model of Insider Trading

Rafael Repullo

Economica, 1999, vol. 66, issue 263, 359-374

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.

Date: 1999
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https://doi.org/10.1111/1468-0335.00175

Related works:
Working Paper: Some Remarks on Leland's Model of Insider Trading (1994)
Working Paper: Some Remarks on Leland's Model of Insider Trading (1994)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:econom:v:66:y:1999:i:263:p:359-374

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