Inside Trading when the Market Deviates from the Semi-strong Efficient Condition
Hong Liu (),
Jingyuan Wu () and
Qingshan Yang ()
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Hong Liu: Key Laboratory of Applied Statistics of MOE, School of Mathematics and Statistics, Northeast Normal University
Jingyuan Wu: Key Laboratory of Applied Statistics of MOE, School of Mathematics and Statistics, Northeast Normal University
Qingshan Yang: Key Laboratory of Applied Statistics of MOE, School of Mathematics and Statistics, Northeast Normal University
Annals of Economics and Finance, 2017, vol. 18, issue 1, 111-128
We study the impacts of shared information and price deviation from the semi-strong efficient condition on traders' trading behavior in the context of Kyle (1985)'s speculative market. We find that when the price is lower than the semi-strong efficient price, the insider and outsiders trade more aggressively using their private information, with a result that more information is incorporated into the price. Moreover, both the insider and outsiders prefer the price to be lower than the semi-strong efficient condition, whereas market makers prefer the price to be higher than the semi-efficient condition.
Keywords: Market makers; Outsiders; Inside trading; Price deviation from semi-strong efficient condition; Nash equilibrium (search for similar items in EconPapers)
JEL-codes: G14 C72 D82 D43 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2017:v:18:i:1:liu:wu:yang
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