2020
DOI: 10.1007/s00712-020-00703-x
|View full text |Cite
|
Sign up to set email alerts
|

Insider trading with different risk attitudes

Abstract: 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 comparativ… Show more

Help me understand this report

Search citation statements

Order By: Relevance

Paper Sections

Select...
3
1

Citation Types

0
4
0

Year Published

2022
2022
2023
2023

Publication Types

Select...
4

Relationship

3
1

Authors

Journals

citations
Cited by 4 publications
(4 citation statements)
references
References 33 publications
0
4
0
Order By: Relevance
“…Recently, ref. [3] extend the Kyle model to the case of two insiders, one risk-neutral and one risk-averse. They find that the market depth depends crucially on the degree of risk aversion, and show that regardless of the degree of risk aversion, the stock price reveals more information than the stock price in [2].…”
Section: Literature Reviewmentioning
confidence: 99%
“…Recently, ref. [3] extend the Kyle model to the case of two insiders, one risk-neutral and one risk-averse. They find that the market depth depends crucially on the degree of risk aversion, and show that regardless of the degree of risk aversion, the stock price reveals more information than the stock price in [2].…”
Section: Literature Reviewmentioning
confidence: 99%
“… [1] studied [11] in which the noise traders are able to correlate their trade with the true price. Recently, [5] extended [11] to the case of two insiders, one risk-neutral and one risk-averse, while [10] studied the case of two insiders in which the first insider is risk-neutral while the second insider is overconfident. Among other extensions, are a group of papers interested in proving the existence (or not) and/or uniqueness of Kyle-type model equilibria (See for example, [3] , [4] , [5] , [6] , [12] , [14] , [15] , [16] , [19] ).…”
Section: Introductionmentioning
confidence: 99%
“…Recently, [5] extended [11] to the case of two insiders, one risk-neutral and one risk-averse, while [10] studied the case of two insiders in which the first insider is risk-neutral while the second insider is overconfident. Among other extensions, are a group of papers interested in proving the existence (or not) and/or uniqueness of Kyle-type model equilibria (See for example, [3] , [4] , [5] , [6] , [12] , [14] , [15] , [16] , [19] ). This paper belongs to the latter type of extensions, more specifically, it extended [11] to the general case of information correlation between the two insiders.…”
Section: Introductionmentioning
confidence: 99%
“…Some papers extended the Kyle model to include multiple risk-averse traders (Subrahmanyam, 1991;Holden and Subrahmanyam, 1994;Vitale, 1995;Zhang, 2004 andBaruch, 2002). Recently, Daher et al (2020) extended the Kyle model to the case of two insiders, one risk-neutral and one risk-averse, while Jiang and Liu (2022) studied the case of two insiders in which the first insider is risk-neutral while the second insider is overconfident. Another direction of the extension of the static Kyle model is in Jain and Mirman (1999) who allowed for the market maker to observe a second signal that is correlated to the order flow.…”
Section: Introductionmentioning
confidence: 99%