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Insider Trading And Voluntary Disclosure

Author

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  • PHILIPPE GRÉGOIRE

    (Département de Finance et Assurance, Faculté des Sciences de l'Administration, Université Laval, Quebec City, Quebec, Canada, G1K 7P4, Canada)

Abstract

We set up a model to study the voluntary disclosure of information by insiders of publicly traded companies. We consider a trading framework as in [14] with many assets and one insider per asset. There is one discretionary liquidity trader who can allocate his trades across the different assets and many noise traders who trade with equal intensity in all assets. Before trade begins, insiders can disclose information in order to attract the discretionary liquidity trades. We show that if the level of noise trading is above a certain threshold, then there is an equilibrium where all insiders do not disclose any information. Below this threshold, equilibria are such that some information is always revealed by insiders. We also find that the greater the number of assets, the smaller the intensity of noise trading must be in order to induce insiders to disclose some information, and we find that insiders reveal all their information when the intensity of noise trading approaches zero.

Suggested Citation

  • Philippe Grégoire, 2008. "Insider Trading And Voluntary Disclosure," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 11(02), pages 143-162.
    • Handle: RePEc:wsi:ijtafx:v:11:y:2008:i:02:n:s0219024908004750
    DOI: 10.1142/S0219024908004750
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