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Inside trading with public information and market regulation

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  • Liu, Hong
  • Li, Zaili

Abstract

In this study, we examine the insider trading model in the context of public information and market regulation. We find that when there is only one insider trader, regulators do not apply regulatory strategies for insider trading. However, regulators will regulate insider trading more strictly when there are multiple insider traders. Meanwhile, regulatory participation leads to more stable but less efficient markets.

Suggested Citation

  • Liu, Hong & Li, Zaili, 2022. "Inside trading with public information and market regulation," Finance Research Letters, Elsevier, vol. 46(PA).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321002920
    DOI: 10.1016/j.frl.2021.102234
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    References listed on IDEAS

    as
    1. Luo, Shunlong, 2001. "The impact of public information on insider trading," Economics Letters, Elsevier, vol. 70(1), pages 59-68, January.
    2. Holden, Craig W & Subrahmanyam, Avanidhar, 1992. "Long-Lived Private Information and Imperfect Competition," Journal of Finance, American Finance Association, vol. 47(1), pages 247-270, March.
    3. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
    4. Liu, Hong & Zhang, Zhixiang, 2011. "Insider trading with public and shared information," Economic Modelling, Elsevier, vol. 28(4), pages 1756-1762, July.
    5. Foster, F Douglas & Viswanathan, S, 1996. "Strategic Trading When Agents Forecast the Forecasts of Others," Journal of Finance, American Finance Association, vol. 51(4), pages 1437-1478, September.
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    Cited by:

    1. 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).

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    More about this item

    Keywords

    Inside trading; Market-depth; Trading intensity; Market-efficient; Regulatory intensity; Nash equilibrium;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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