IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/117813.html
   My bibliography  Save this paper

Existence of Linear Equilibria in The Kyle Model with Partial Correlation and Two Risk Neutral Traders

Author

Listed:
  • Daher, Wassim
  • Saleeby, Elias G.

Abstract

We study a generalization of the static model of \cite{K} with two risk neutral insiders to the case where each insider is partially informed about the value of the stock. First, we provide a necessary and sufficient condition for the uniqueness of the linear Bayesian equilibrium. Specifically, we show that, when the covariance matrix of the errors terms of the insiders' signals, is not singular, the linear Bayesian equilibrium is not unique. Then, we carry out a comparative statics analysis.

Suggested Citation

  • Daher, Wassim & Saleeby, Elias G., 2023. "Existence of Linear Equilibria in The Kyle Model with Partial Correlation and Two Risk Neutral Traders," MPRA Paper 117813, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:117813
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/117813/1/DS-Heliyon-Last%20Version.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. RenÈ Caldentey & Ennio Stacchetti, 2010. "Insider Trading With a Random Deadline," Econometrica, Econometric Society, vol. 78(1), pages 245-283, January.
    3. Daher, Wassim & Mirman, Leonard J. & Saleeby, Elias G., 2014. "Two-period model of insider trading with correlated signals," Journal of Mathematical Economics, Elsevier, vol. 52(C), pages 57-65.
    4. Jain, Neelam & Mirman, Leonard J., 1999. "Insider trading with correlated signals," Economics Letters, Elsevier, vol. 65(1), pages 105-113, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Daher, Wassim & Karam, Fida & Ahmed, Naveed, 2023. "Insider Trading with Semi-Informed Traders and Information Sharing: The Stackelberg Game," MPRA Paper 118138, University Library of Munich, Germany.
    2. Wassim Daher & Fida Karam & Naveed Ahmed, 2023. "Insider Trading with Semi-Informed Traders and Information Sharing: The Stackelberg Game," Mathematics, MDPI, vol. 11(22), pages 1-16, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wassim Daher & Harun Aydilek & Elias G. Saleeby, 2020. "Insider trading with different risk attitudes," Journal of Economics, Springer, vol. 131(2), pages 123-147, October.
    2. 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.
    3. 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.
    4. Daher, Wassim & Mirman, Leonard J. & Saleeby, Elias G., 2014. "Two-period model of insider trading with correlated signals," Journal of Mathematical Economics, Elsevier, vol. 52(C), pages 57-65.
    5. Daher, Wassim & Mirman, Leonard J., 2006. "Cournot duopoly and insider trading with two insiders," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(4), pages 530-551, September.
    6. Nicolas S. Lambert & Michael Ostrovsky & Mikhail Panov, 2018. "Strategic Trading in Informationally Complex Environments," Econometrica, Econometric Society, vol. 86(4), pages 1119-1157, July.
    7. Daher, Wassim & Mirman, Leonard J., 2007. "Market structure and insider trading," International Review of Economics & Finance, Elsevier, vol. 16(3), pages 306-331.
    8. Karam, Fida & Daher, Wassim, 2013. "Insider trading in a two-tier real market structure model," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(1), pages 44-52.
    9. Vayanos, Dimitri & Wang, Jiang, 2013. "Market Liquidity—Theory and Empirical Evidence ," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 1289-1361, Elsevier.
    10. Gong, Aibo & Ke, Shaowei & Qiu, Yawen & Shen, Rui, 2022. "Robust pricing under strategic trading," Journal of Economic Theory, Elsevier, vol. 199(C).
    11. Roşu, Ioanid, 2019. "Fast and slow informed trading," Journal of Financial Markets, Elsevier, vol. 43(C), pages 1-30.
    12. Vayanos, Dimitri & Wang, Jiang, 2012. "Market liquidity - theory and empirical evidence," LSE Research Online Documents on Economics 119044, London School of Economics and Political Science, LSE Library.
    13. Chao Ying, 2020. "The Pre-FOMC Announcement Drift and Private Information: Kyle Meets Macro-Finance," 2020 Papers pyi149, Job Market Papers.
    14. Karam, Fida & Daher, Wassim, 2013. "Insider trading in a two-tier real market structure model," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(1), pages 44-52.
    15. Gong, Fuzhou & Liu, Hong, 2012. "Inside trading, public disclosure and imperfect competition," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 200-223.
    16. Katsumasa Nishide, 2009. "Insider trading with correlation between liquidity trading and a public signal," Quantitative Finance, Taylor & Francis Journals, vol. 9(3), pages 297-304.
    17. Grégoire, Philippe & Huang, Hui, 2012. "Information disclosure with leakages," Economic Modelling, Elsevier, vol. 29(5), pages 2005-2010.
    18. 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.
    19. 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.
    20. Jhinyoung Shin & Rajdeep Singh, 2010. "Corporate Disclosures: Strategic Donation of Information," International Review of Finance, International Review of Finance Ltd., vol. 10(3), pages 313-337, September.

    More about this item

    Keywords

    Insider trading; Risk neutrality; Coefficient of Correlation; Partial Correlation; Market structure; Kyle model;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:117813. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.