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Insider trading with public and shared information

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  • Liu, Hong
  • Zhang, Zhixiang

Abstract

We study the impact of public information and shared information on traders' trading behavior in the context of Kyle's (1985) speculative market. We suppose that there are four types of traders in our model: one insider, M outsiders, liquidity traders, and market makers. We explicitly describe the unique linear Nash equilibrium and find that public information harms the insider but benefits the outsiders and noise traders. Also, the market is more efficient because of the existence of public information.

Suggested Citation

  • Liu, Hong & Zhang, Zhixiang, 2011. "Insider trading with public and shared information," Economic Modelling, Elsevier, vol. 28(4), pages 1756-1762, July.
    • Handle: RePEc:eee:ecmode:v:28:y:2011:i:4:p:1756-1762
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    References listed on IDEAS

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    1. Jean-Charles Rochet & Jean-Luc Vila, 1994. "Insider Trading without Normality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(1), pages 131-152.
    2. Daher, Wassim & Mirman, Leonard J., 2007. "Market structure and insider trading," International Review of Economics & Finance, Elsevier, vol. 16(3), pages 306-331.
    3. Luo, Shunlong, 2001. "The impact of public information on insider trading," Economics Letters, Elsevier, vol. 70(1), pages 59-68, January.
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    Citations

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    Cited by:

    1. Wassim Daher & Harun Aydilek & Fida Karam & Asiye Aydilek, 2014. "Insider trading with product differentiation," Journal of Economics, Springer, vol. 111(2), pages 173-201, March.
    2. Liu, Hong & Qi, Lina & Li, Zaili, 2019. "Insider trading, representativeness heuristic insider, and market regulation," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 48-64.
    3. Chu, Chien Chi & Chang, Chiao Yi & Zhou, Rui Jie, 2021. "The nonlinear connection between 52-week high and announcement effect of insider trading — Evidence from mainland China and Taiwan," Economic Modelling, Elsevier, vol. 94(C), pages 1043-1057.
    4. Li, Ningwei & Li, Zhihua & Liu, Hong & Yang, Qingshan, 2024. "Strategic information leakage with market supervision," The North American Journal of Economics and Finance, Elsevier, vol. 73(C).
    5. Du, Sarina & Liu, Hong, 2015. "The overconfident trader does not always overreact to his information," Economic Modelling, Elsevier, vol. 46(C), pages 384-390.
    6. Daher, Wassim & Karam, Fida & Mirman, Leonard J., 2012. "Insider trading with different market structures," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 143-154.
    7. Liu, Hong & Chai, Shujuan, 2020. "Risk aversion, public disclosure, and partially informed outsiders," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    8. Julio A. Crego & Jin Huang, 2017. "Early Birds and Second Mice in the Stock Market," Working Papers wp2018_1717, CEMFI.
    9. Liu, Hong & Li, Zaili, 2022. "Inside trading with public information and market regulation," Finance Research Letters, Elsevier, vol. 46(PA).
    10. Zhou, Deqing, 2015. "The virtue of overconfidence when you are not perfectly informed," Economic Modelling, Elsevier, vol. 47(C), pages 105-110.
    11. Jiang, Ying & Liu, Hong & Yang, Qingshan, 2024. "Asymmetric information correlation in financial markets," The North American Journal of Economics and Finance, Elsevier, vol. 71(C).
    12. Grégoire, Philippe & Huang, Hui, 2012. "Information disclosure with leakages," Economic Modelling, Elsevier, vol. 29(5), pages 2005-2010.
    13. Lyudmila A. Glik & Oleg L. Kritski, 2014. "Finding informed traders in futures and their inderlying assets in intraday trading," Papers 1402.6583, arXiv.org.
    14. Hong Liu & Jingyuan Wu & Qingshan Yang, 2017. "Inside Trading when the Market Deviates from the Semi-strong Efficient Condition," Annals of Economics and Finance, Society for AEF, vol. 18(1), pages 111-128, May.
    15. Liu, Hong & Du, Sarina, 2016. "Can an overconfident insider coexist with a representativeness heuristic insider?," Economic Modelling, Elsevier, vol. 54(C), pages 170-177.
    16. Wang, Kun Tracy & Wang, Wanbin Walter, 2017. "Competition in the stock market with asymmetric information," Economic Modelling, Elsevier, vol. 61(C), pages 40-49.
    17. Julio A. Crego & Jin Huang, 2017. "Early Birds and Second Mice in the Stock Market," Working Papers wp2017_1717, CEMFI.
    18. Gong, Fuzhou & Liu, Hong, 2012. "Inside trading, public disclosure and imperfect competition," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 200-223.
    19. Zhang, Tai-Wei & Chueh, Horace & Hsu, Yao Hua, 2015. "Day-of-the-week trading patterns of informed and uninformed traders in Taiwan's foreign exchange market," Economic Modelling, Elsevier, vol. 47(C), pages 271-279.

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