Regulating Insider Trading When Investment Matters

Luis Medrano and Xavier Vives

Review of Finance, 2004, vol. 8, issue 2, 199-277

Abstract: We provide a general framework for analyzing the effects of insider trading on real investment and welfare as well as the consequences of different regulatory policies in a model where all traders are rational expected-utility maximizers and aware of their position in the market. We find that: with costly information acquisition, an "abstain-or-disclose" rule tends to be optimal; with free information acquisition, laissez-faire is better. This suggests enforcing an abstain-or-disclose rule with a high standard of proof for inside information. Our approach also uncovers the pitfalls of welfare analysis in the noise-trader model.

Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (39)

Downloads: (external link)
http://journals.kluweronline.com/issn/1572-3097/contents (text/html)
Access to full text is restricted to subscribers.

Related works:
Journal Article: Regulating Insider Trading When Investment Matters (2004)
Working Paper: Regulating Insider Trading when Investment Matters (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:eurfin:v:8:y:2004:i:2:p:199-277

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/10679

Access Statistics for this article

Review of Finance is currently edited by Marco Pagano

More articles in Review of Finance from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().