This paper studies the welfare economics of informed trading in a stock market. We provide a model in which all agents are rational and trade either to exploit information or to hedge risk. We analyze the effect of more informative prices on investment, given that this dependence will itself be...

A number of economists have supported the taxation of speculation in financial markets. We examine the welfare economics of such a tax in a model of trading in a nancial market where some agents have superior information. We show that in some cases a tax on speculators may actually increase...

A number of economists have supported the taxation of speculation in financial markets. We examine the welfare economics of such a tax in a model of a financial market where some agents have superior information and others have a hedging motive. We show that a tax on speculators may actually...

This paper studies the welfare economics of informed trading in a stock market. We model the effect of more informative prices on investment, given that this dependence will itself be reflected in equilibrium prices. We show that in rational expectations equilibrium with price-taking competitive...