Two-Period Model of Insider Trading With Correlated Signals

27 Pages Posted: 10 Mar 2020

See all articles by Wassim Daher

Wassim Daher

Gulf University for Science and Technology (GUST)

Leonard J. Mirman

University of Virginia - Department of Economics

Elias G. Saleeby

affiliation not provided to SSRN

Date Written: March 31, 2014

Abstract

In this article, we extend the one-period model of Jain and Mirman (1999) for asset trading with two correlated signals to a two period model. We then prove the existence and uniqueness of the Bayesian linear equilibrium. Finally, we perform comparative statics analysis with respect to Kyle (1985). Our findings reveal that adding another correlated signal (the real signal) to the total order flow of Kyle (1985), increases the amount of information incorporated in the stock price at each period and decreases the insider’s expected profits at each period.

Keywords: Insider Trading, Correlated signals, Difference Equation, Kyle model

JEL Classification: G14, D82

Suggested Citation

Daher, Wassim and Mirman, Leonard J. and Saleeby, Elias G., Two-Period Model of Insider Trading With Correlated Signals (March 31, 2014). Journal of Mathematical Economics, Vol. 52, No. 1, 2014, Available at SSRN: https://ssrn.com/abstract=3540263 or http://dx.doi.org/10.2139/ssrn.3540263

Wassim Daher (Contact Author)

Gulf University for Science and Technology (GUST) ( email )

Department of Mathematics and Natural Sciences
Office W1-168
Mishref, Mubarak Al-Abdullah Al-Jaber Area (West Mishref)
Kuwait
+965 25 30-7376 (Phone)
+965 25 30-7293 (Fax)

Leonard J. Mirman

University of Virginia - Department of Economics ( email )

1818 Winston Rd
Charlottesville, VA
United States

Elias G. Saleeby

affiliation not provided to SSRN

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