Insider trading: regulation, risk reallocation, and welfare

Javier Estrada

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: I argue in this paper that the imposition of insider trading regulations on a securities market generates not on1y a reallocation of wealth from insiders to liquidity traders, but also a reallocation of risk from the former to the latter. I further argue that, although the wealth reallocation has no impact on social welfare, under plausible assumptions, the risk reallocation imposes a cost on society.

Keywords: Insider; trading; Securities; Regulation (search for similar items in EconPapers)
Date: 1995-02
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:3900

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