Insider Trading With Different Risk Attitudes
Wassim Daher (),
Harun Aydilek and
Elias G. Saleeby
MPRA Paper from University Library of Munich, Germany
This paper investigates the effect of different risk attitudes on the financial decisions of two insiders trading in the stock market. We consider a static version of the Kyle (1985) model with two insiders. Insider 1 is risk neutral while insider 2 is risk averse with negative exponential utility. First, we prove the existence of a unique linear equilibrium. Second, we obtain somewhat surprising results on how the risk attitudes affect the market liquidity, the price efficiency, when we carry out a comparative static analysis with respect to Tighe (1989) and Holden and Subrahmanyam(1994) models.
Keywords: Insider trading; Risk neutrality; Risk aversion; Exponential Utility; Market structure; Kyle model (search for similar items in EconPapers)
JEL-codes: D8 D82 G1 G14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-gth and nep-upt
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https://mpra.ub.uni-muenchen.de/81733/1/MPRA_paper_81733.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/98021/10/MPRA_paper_98021.pdf revised version (application/pdf)
Journal Article: Insider trading with different risk attitudes (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:81733
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