search query: @indexterm INSIDER TRADING / total: 155
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| Author: | Laffont, J. J. Maskin, E. S. |
| Title: | The efficient market hypothesis and insider trading on the stock market. |
| Journal: | Journal of Political Economy
1990 : FEB, VOL. 98:1, p. 70-93 |
| Index terms: | STOCK MARKETS ECONOMIC EFFICIENCY INSIDER TRADING |
| Language: | eng |
| Abstract: | The behavior of a large trader with private information about the mean of an asset with a risky return is studied. It is argued that if the variability of the return is not too great, typically the trader will find it desirable to ensure that the market price does not reveal his information, that is, that a "pooling" equilibrium (E) arises. Such an E has the advantage of avoiding the incentive constraints that arise in "separating" E, where information can be inferred from prices. Thus the efficient market hypothesis may well fail if there is imperfect competition. Despite the uninformativeness of prices, the other (competitive) traders are also better off in the pooling E than in any separating E. |
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