Author : Fida Karam
Publisher :
ISBN 13 :
Total Pages : 22 pages
Book Rating : 4.:/5 (13 download)
Book Synopsis Insider Trading in a Two-Tier Real Market Structure Model by : Fida Karam
Download or read book Insider Trading in a Two-Tier Real Market Structure Model written by Fida Karam and published by . This book was released on 2019 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we study the real and financial effects of insider trading in the spirit of Jain and Mirman (1999). Unlike the previous works that address this issue, we suppose that the production of the real good is costly and depends mainly of the price of an intermediate good produced locally by a privately-owned firm. We show that the real output of the final good chosen by the insider as well as the price of the intermediate good set by the privately-owned firm are both greater than it would be in the absence of insider trading. Furthermore, the parameters of both real markets affect the stock price and the stock pricing rule. Besides, when compared to Jain and Mirman (2000) and (2002), this two-tier real market structure does not alter the amount of information disseminated in the stock price or the level of insider trading. Next, we add a second insider to the model. We show that competition in the financial sector decreases the level of output produced by firm 1 and the price of the intermediate good with respect to initial model. Moreover, it affects the insiders' trades and increases the amount of information revealed in the stock price.