Insider Trading When There May Not be an Insider

55 Pages Posted: 25 Jan 2016 Last revised: 22 Nov 2021

See all articles by Liang Dai

Liang Dai

The Chinese University of Hong Kong, Shenzhen (CUHK-Shenzhen)

Yenan Wang

Amsterdam Business School, University of Amsterdam

Ming Yang

UCL

Date Written: July 25, 2021

Abstract

We study the interaction between the usual inside information (about asset values) and information about its existence (i.e., about the existence of insiders) in an otherwise standard continuous-time Kyle-Back model. Interestingly, only the inside information, conditional on its existence, rather than the information about its existence, is revealed in equilibrium and affects asset prices and market liquidity, and it is revealed asymptotically in the long run. Our model sheds light on the impact of stock market regulations on market liquidity and reconciles the relevant mixed empirical findings.

Keywords: insider trading, uncertainty about insider's existence, liquidity effects of regulations

JEL Classification: G14, D83

Suggested Citation

Dai, Liang and Wang, Yenan and Yang, Ming, Insider Trading When There May Not be an Insider (July 25, 2021). Available at SSRN: https://ssrn.com/abstract=2720736 or http://dx.doi.org/10.2139/ssrn.2720736

Liang Dai

The Chinese University of Hong Kong, Shenzhen (CUHK-Shenzhen)

Yenan Wang

Amsterdam Business School, University of Amsterdam ( email )

Roetersstraat 18
Amsterdam, 1018 WB
Netherlands

Ming Yang (Contact Author)

UCL ( email )

Drayton House, 30 Gordon Street
30 Gordon Street
London, WC1H 0AX
United Kingdom

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