Work

Voting for insider trading regulation. An experimental study of informed and uninformed traders’ preferences

Year: 2024

Type: article

Abstract: Capital markets often regulate insider trading, but whether such regulation aligns with traders' preferences is an open question. This study examined traders' regulation preferences conditional on their prospects of becoming informed. Of 64 referenda, traders decided 41 (64%) against regulation. Moreover, traders' prospects of becoming informed significantly impacted the outcomes of the referenda. In markets in which a group of traders has no chance of receiving inside information, 47% of the referenda are decided against regulation. When all traders could get such information, 81% are. Individual votes reveal that traders who know they will remain uninformed support regulation in 69.27% of the cases, while informed traders do so only 8.33% of the time. Traders who may or may not become informed support regulation 33.33% of the time.

Source: Journal of Banking & Finance

DOI: 10.1016/j.jbankfin.2024.107295

Authors: Dominik Schmidt, Thomas Stöckl, Stefan Palan

Institutions: Management Center Innsbruck, University of Graz

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $3,240