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Voting for insider trading regulation. An experimental study of informed and uninformed traders’ preferences

Author

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  • Dominik Schmidt

    (UP1 UFR02 - Université Paris 1 Panthéon-Sorbonne - École d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne, UP1 - Université Paris 1 Panthéon-Sorbonne)

  • Thomas Stöckl
  • Stefan Palan

Abstract

Capital markets often regulate insider trading, but whether such regulation aligns with traders' preferences is an open question. This study examined traders' regulation preferences conditional on their prospects of becoming informed. Of 64 referenda, traders decided 41 (64%) against regulation. Moreover, traders' prospects of becoming informed significantly impacted the outcomes of the referenda. In markets in which a group of traders has no chance of receiving inside information, 47% of the referenda are decided against regulation. When all traders could get such information, 81% are. Individual votes reveal that traders who know they will remain uninformed support regulation in 69.27% of the cases, while informed traders do so only 8.33% of the time. Traders who may or may not become informed support regulation 33.33% of the time.

Suggested Citation

  • Dominik Schmidt & Thomas Stöckl & Stefan Palan, 2024. "Voting for insider trading regulation. An experimental study of informed and uninformed traders’ preferences," Post-Print hal-04692482, HAL.
    • Handle: RePEc:hal:journl:hal-04692482
    DOI: 10.1016/j.jbankfin.2024.107295
    Note: View the original document on HAL open archive server: https://hal.science/hal-04692482
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    More about this item

    Keywords

    Experimental finance; Asset market; Insider trading regulation; Vote/referendum; Distributional preferences; JEL classification: G10 G18 G40 Experimental finance Asset market Insider trading regulation;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G40 - Financial Economics - - Behavioral Finance - - - General

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