Insider trading and government intervention

Zhihua Li, Hong Liu and Qingshan Yang

International Review of Economics & Finance, 2025, vol. 101, issue C

Abstract: This paper studies an insider trading model with government intervention aiming to stabilize price volatility, in one-period and multi-period scenarios. In a single-period model, we identify a threshold for the strength of government intervention that determines the interplay among market characteristics contingent on whether this threshold is exceeded or not. Furthermore, we find that government intervention effectively stabilizes price fluctuation in the multi-period model. Meanwhile, the insider adopts alternating increasing trading strategies (V-shaped) while the government adopts corresponding hedging strategies. Finally, empirical analysis is used to verify the effectiveness of government intervention.

Keywords: Insider trading; Price stability; Hedging strategy; Price disclosure; Government intervention (search for similar items in EconPapers)
JEL-codes: C72 D43 D82 G12 G14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:101:y:2025:i:c:s1059056025002679

DOI: 10.1016/j.iref.2025.104104

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