Existence of Linear Equilibria in The Kyle Model with Partial Correlation and Two Risk Neutral Traders

Wassim Daher and Elias G. Saleeby

MPRA Paper from University Library of Munich, Germany

Abstract: We study a generalization of the static model of \cite{K} with two risk neutral insiders to the case where each insider is partially informed about the value of the stock. First, we provide a necessary and sufficient condition for the uniqueness of the linear Bayesian equilibrium. Specifically, we show that, when the covariance matrix of the errors terms of the insiders' signals, is not singular, the linear Bayesian equilibrium is not unique. Then, we carry out a comparative statics analysis.

Keywords: Insider trading; Risk neutrality; Coefficient of Correlation; Partial Correlation; Market structure; Kyle model (search for similar items in EconPapers)
JEL-codes: D82 G14 (search for similar items in EconPapers)
Date: 2023-06-27
New Economics Papers: this item is included in nep-gth
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Citations: View citations in EconPapers (2)

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