Insider Trading: Should It Be Prohibited?
Journal of Political Economy, 1992, vol. 100, issue 4, 859-87
Insider trading moves forward the resolution of uncertainty. Using a rational expectations model with endogenous investment level, the author shows that, when insider trading is permitted, (1) stock prices better reflect information and will be higher on average, (2) expected real investment will rise, (3) markets are less liquid, (4) owners of investment projects and insiders will benefit, and (5) outside investors and liquidity traders will hurt. Total welfare may increase or decrease depending on the economic environment. Factors that favor the prohibition of insider trading are identified. Copyright 1992 by University of Chicago Press.
References: Add references at CitEc
Citations View citations in EconPapers (136) Track citations by RSS feed
Downloads: (external link)
http://dx.doi.org/10.1086/261843 full text (application/pdf)
Access to full text is restricted to subscribers. See http://www.journals.uchicago.edu/JPE for details.
Working Paper: Insider Trading: Should It Be Prohibited? (1990)
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:ucp:jpolec:v:100:y:1992:i:4:p:859-87
Access Statistics for this article
More articles in Journal of Political Economy from University of Chicago Press
Series data maintained by Journals Division ().