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- Publisher
- Springer Journals
- Copyright
- Copyright © The Editorial Office of AMAS & Springer-Verlag GmbH Germany 2021
- ISSN
- 0168-9673
- eISSN
- 1618-3932
- DOI
- 10.1007/s10255-021-1023-y
- Publisher site
- See Article on Publisher Site
Abstract
This paper studies the trading behavior of an irrational insider and its influence on the market equilibrium in the presence of market regulation. We find that the market with only one insider with private information is almost close to a strong efficient market, under the condition of market regulation. In the equilibrium, the probability of the insider being caught trading with private information is zero, which shows that the reasonable behavior of the regulator is to essentially give up regulation. But the market efficiency and the irrational trader’s trading intensity all greatly improve because of the existence of the market regulation.
Journal
Acta Mathematicae Applicatae Sinica – Springer Journals
Published: Aug 5, 2021
Keywords: insider trading; market regulation; heterogeneous prior beliefs; asymmetric information; 91B24; 91B26