Insider competition under two-dimensional uncertainty and informational asymmetry
Finance Research Letters, 2016, vol. 19, issue C, 79-82
This paper shows that the consideration of two-dimensional uncertainty affecting cash flows and the existence of multiple, heterogeneously informed insiders provide reversed findings concerning aggregate insider trading profit and market liquidity. In particular, it is shown that heterogeneously informed insiders trade more aggressively. This sensitizes market makers and aggravates illiquidity. As a result, aggregate trading profit of two insiders is greater compared to one monopolist whereas traditional models state that competition increases liquidity and reduces total trading profit. Hence, from a welfare perspective, competition among insiders may be counterproductive.
Keywords: Insider trading; Market liquidity; Market microstructure; Informational asymmetry; Uncertainty (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:19:y:2016:i:c:p:79-82
Access Statistics for this article
Finance Research Letters is currently edited by R. GenÃ§ay
More articles in Finance Research Letters from Elsevier
Series data maintained by Dana Niculescu ().