This paper analyzes the welfare effects of permitting firms to negotiate contractually the right to allow corporate insiders to trade shares in the firm on private information. A computational framework is employed to (i) analyze formally the effects of insider trading on managerial investment...

Several models predict that both market liquidity and trading volume generated by less informed traders do not increase when there is insider trading. Available empirical evidence is mixed and still relatively small, because of the inherent di¢ culty to identify insider trading events. Our...

The single auction equilibrium of Kyle's (1985) is studied, in which noise traders may be partially informed, or alternatively they can be manipulated. Unlike Kyle's assumption that the quantity traded by the noise traders is independent of the asset value, we assume that the noise traders are...

Issues related to insider trading remain popular research topics. Empirical studies using historical data are limited by two key factors: 1) the inability to identify exactly who possesses inside information, and 2) the inability to identify the accuracy of information possessed. Advances in...

We consider the effect of asymmetric information on price formation process in a financial market where private information is held by a market maker. A model is presented where two market makers with two different information partitions compete in prices. At each stage a bid-ask auction between...

We study the efficiency of the equilibrium price in a centralized, order-driven market where many asymmetrically informed traders are active for many periods. We show that asymmetries of information can lead to sub-optimal information revelation with respect to the symmetric case. In particular,...

We consider the effect of asymmetric information on price formation process in a financial market where private information is held by a market maker. A Bayesian game is proposed in which there is price competition between two market makers with two different information partitions. At each...

We consider the effect of asymmetric information on price formation process in a quote-driven market where one market maker receives a private signal on the security's fundamental. A model is presented where market makers repeatedly compete in prices: at each stage a bid-ask auction occurs and...

We study the efficiency of the equilibrium price in a centralized, orderdriven market where many asymmetrically informed traders are active for many periods. We show that asymmetries of information can lead to suboptimal information revelation with respect to the symmetric case. In particular,...