Insider trading regulation and shorting constraints. Evaluating the joint effects of two market interventions.

Merl, Robert; StÃ¶ckl, Thomas; Palan, Stefan

doi:10.1016/j.jbankfin.2022.106490

Cited by 5 publications

(5 citation statements)

References 64 publications

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“…This index comprises four key components, each of which can also be considered a standalone index: (i) accessibility of information, (ii) absence of trading restrictions, (iii) safeguards for protecting investors' wealth, and (iv) market liquidity. The proposed index serves to consolidate a multitude of perspectives drawn from the financial literature, an aspect that has not been done before, enabling a quantification of the impact of various "frictions" on the decision-making processes within the capital market, as demonstrated by Liew et al (2022) and Merl et al (2022). Our study bridges this gap in the literature by offering a comprehensive overview of the diverse frictions examined within the financial domain.…”

Section: Introductionmentioning

confidence: 91%

“…For instance, the absence of specific markets and constraints on foreign investors can prevent certain individuals from implementing their preferred trading strategies. Merl et al (2022) investigated the impact of market interventions or restrictions on investor behavior. They found that informed traders increase their market activity in the absence of restrictions, thus reducing mispricing and market spreads.…”

Section: Indexes For Market Frictionsmentioning

confidence: 99%

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Portfolio management under capital market frictions: a grey clustering approach

Ţilică,

Dragotă,

Delcea

et al. 2024

Financ Innov

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International portfolio management is influenced by the existence of “frictions”, factors or events that interfere with trade, which are linked in financial literature to market-specific factors, such as available information, restrictions, investor protection, or market liquidity. Given the wide variety of factors that can be included in these categories, scientific studies typically focus on a reduced number of indicators at a time in order to offer an in depth analysis of their impact. We offer a consolidated view of the perspectives observed in financial literature by proposing a novel index for market frictions that includes all these four components and rank fifteen post-communist East European capital markets based on their index values. We then constructed various scenarios by assuming different levels of importance for the criteria used in index construction. By employing grey clustering analysis, we cluster these capital markets into three categories—strongly recommended, recommended with some reserve, and not recommended—based on the importance given by the decision maker to these factors. The results show that some of the studied markets are in the same cluster, irrespective of the chosen scenario. The only market always included in the “strongly recommended” category is Hungary, indicating that it is a good investment option for international participants. Bulgaria and Slovakia are always regarded as “recommended with reserve” markets, whereas the Republic of Moldova is part of the “not recommended” category. The other markets show a degree of variability that can be explained by different investor perspectives. This study contributes to the existing literature by combining the advantages of grey clustering and portfolio analysis. Investors can use this approach during the decision-making process related to their investments.

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Section: Introductionmentioning

confidence: 91%

Section: Indexes For Market Frictionsmentioning

confidence: 99%

Portfolio management under capital market frictions: a grey clustering approach

Ţilică,

Dragotă,

Delcea

et al. 2024

Financ Innov

View full text Add to dashboard Cite

show abstract

“…Another strand where experiments played an early role in finance are asset market experiments. Merl et al (2023) employ experimental markets to analyze asset prices in various treatments. They study the interaction of restrictions on short selling (of assets and cash) and on insider trading.…”

Section: Overview Of the Special Issue "Experiments In Finance"mentioning

confidence: 99%

“…Cox et al (2023) investigate a key issue that has been the subject of intense debate among economists and policymakers: to which degree should "stress test" information collected by regulators (based on the Dodd-Frank Act) be disclosed publicly? Merl et al (2023) analyze regulations that curtail the implementation of specific trading strategies (shorting and insider trading).…”

Section: Overview Of the Special Issue "Experiments In Finance"mentioning

confidence: 99%

Experiments in finance

Kirchler

Weitzel

2023

Journal of Banking & Finance

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“…The rise in business activities coupled with free trade liberalisation across countries has simultaneously entailed an increase in securities transaction as well as insider trading (IT). Several scholars like He (2022) and Merl et al (2022) consider IT to be a financial crime which occurs when transacting with securities notably during the buying and selling of shares. In fact, IT is characterised by the influence and usage of some prior knowledge concerning sensitive information of some future events of a corporate body which results in Conflict of interest: The author declares that there is no competing financial interest or personal relationship that could have appeared to influence the work reported in this paper.…”

Section: Introductionmentioning

confidence: 99%

Insider trading laws to counter financial crime: a comparative study of Mauritius, UK and US laws

Beebeejaun

2023

JFC

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Purpose The rise in business activities coupled with free trade liberalisation across countries has entailed an increase in securities transaction as well as insider trading (IT). In fact, IT is characterised by the influence and usage of some prior knowledge concerning sensitive information of a corporate body which results in a financial benefit to the insider trader. The practice of IT is not only unethical but also illegal and this statement is witnessed by the mushrooming of laws across the globe categorising IT as an offence. However, the type of punishment varies in different countries depending on various factors. Consequently, the purpose of this paper is to assess the adequacy and efficiency of IT laws in the context of a developing country being Mauritius. Design/methodology/approach To achieve the research objective, the Mauritian laws on IT were compared with the corresponding laws of some developed countries like the USA and the UK. As such, a qualitative research method was adopted. In particular, the black letter approach was used to examine the relevant laws of Mauritius, UK and USA on IT. A comparative analysis was conducted concerning IT laws for each country with the view of suggesting recommendations for Mauritian stakeholders to adopt to enhance the existing legal and regulatory framework on IT. Findings It was found that Mauritian IT laws are largely inspired from both the US and UK corresponding legislation. However, Mauritian laws need to be strengthened by imposing some more severe penalties in terms of fines and terms of imprisonment like the USA has established. The Mauritian Financial Services Commission as the regulator also needs to play a more active role in disseminating particularities of IT laws, offences and penalties to the civil society at large. Originality/value At present, this study will be among the first academic writings on the efficiency of IT laws in Mauritius and also, because existing literature is quite scarce on assessing the adequacy of IT legislation in developing countries, this research aims at filling in the gap in literature. The study is carried out with the aim of combining a large amount of empirical, theoretical and factual information that can be of use to various stakeholders and not only to academics.

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Insider trading regulation and shorting constraints. Evaluating the joint effects of two market interventions.

Cited by 5 publications

References 64 publications

Portfolio management under capital market frictions: a grey clustering approach

Portfolio management under capital market frictions: a grey clustering approach

Experiments in finance

Insider trading laws to counter financial crime: a comparative study of Mauritius, UK and US laws

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