Insider Trading With Different Risk Attitudes
نویسندگان
چکیده
This paper investigates the effect of different risk attitudes on the financial decisions of two insiders trading in the stock market. We consider a static version of the Kyle (1985) model with two insiders. Insider 1 is risk neutral while insider 2 is risk averse with negative exponential utility. First, we prove the existence of a unique linear equilibrium. Second, we obtain somewhat surprising results on how the risk attitudes affect the market liquidity, the price efficiency, when we carry out a comparative static analysis with respect to Tighe (1989) and Holden and Subrahmanyam(1994) models. JEL classification: G14, D82
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