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
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/81733/1/MPRA_paper_81733.pdf original version (application/pdf)
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:pra:mprapa:81733
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().