Files in this item

FilesDescriptionFormat

application/pdf

application/pdf9011053.pdf (3MB)Restricted to U of Illinois
(no description provided)PDF

Description

Title:Three essays on insider trading
Author(s):Tighe, Carla Evelyn
Department / Program:Economics
Discipline:Economics
Degree Granting Institution:University of Illinois at Urbana-Champaign
Degree:Ph.D.
Genre:Dissertation
Subject(s):Economics, General
Economics, Finance
Economics, Theory
Abstract:This dissertation presents three theoretical essays on insider trading in financial markets. The first essay studies the workings of a cash market and a futures market under uncertainty. The model in this essay is an extension of work by Danthine (Journal of Economic Theory, 1978), in which perfectly competitive risk averse producers can sell their output on the cash market, at an uncertain price, or on a futures market at a guaranteed price. Risk averse speculators also trade in futures, having received noisy signals about eventual cash demand. In my first essay, the speculators are as uniformed as the competitive producers. A dominant firm, however, possesses information about cash demand. Each uniformed agent has individual beliefs about demand. In equilibrium, these beliefs remain heterogeneous. The inside information of the dominant firm is not necessarily revealed.
The second and third essays study a financial market in which a single risky asset is traded. This work generalizes a paper by Kyle (Econometrica, 1985), in which a single insider knows the value of the risky asset perfectly. Uninformed traders (market makers) and nonrational noise traders also trade in the market. My second essay generalizes Kyle (1985) to allow for a finite number of noncolluding insiders to trade. As the number of insiders increases, insider profits--both individual and for the group as a whole--decrease, and more of the inside knowledge is incorporated into the market-clearing price. My third essay studies two noncolluding insiders. These insiders, however, do not necessarily know the precise value of the risky asset. In the first section of this essay, one insider has perfect information, while the other receives a noisy signal. In the second section, both insiders receive noisy signals. The results in these extensions of the model depend upon how informative the signals are. If the variance of each signal approaches infinity, the signal is virtually useless, and the insiders will not trade. Less noisy signals provide results comparable to the perfect information case of the second essay.
Issue Date:1989
Type:Text
Language:English
URI:http://hdl.handle.net/2142/20610
Rights Information:Copyright 1989 Tighe, Carla Evelyn
Date Available in IDEALS:2011-05-07
Identifier in Online Catalog:AAI9011053
OCLC Identifier:(UMI)AAI9011053


This item appears in the following Collection(s)

Item Statistics