Asset markets with insider trading disclosure rule and reselling constraint: An experimental analysis

Edward Halim and Yohanes Riyanto

Journal of Economic Dynamics and Control, 2020, vol. 110, issue C

Abstract: We investigate the impact of compulsory insider-trading disclosure and its combination with a mandatory holding rule on price predictability and asset mispricing. We modify the dynamic price-adjustment model to account for insiders’ private information. Our results show that insiders produce weakly-characterized price signals that induce a less than proportional price adjustment to the changes in the dividend value, in both markets with disclosure rule and holding requirement, in comparison with unregulated markets. A shift in insiders’ strategies from information-motivated to liquidity-motivated trading appears to fuel the impairment of price predictability in regulated markets. The exacerbation of asset mispricing in markets with holding restriction is characterized by a growth in the speculative transactions and loss-making trading proposals.

Keywords: Laboratory experiment; Asset market; Insider; Disclosure; Holding requirement; Asymmetric information (search for similar items in EconPapers)
JEL-codes: C91 D53 G02 G14 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:110:y:2020:i:c:s0165188919301447

DOI: 10.1016/j.jedc.2019.103745

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