Work

When chasing the offender hurts the victim: The case of insider legislation

Year: 2016

Type: article

Abstract: Backers and opponents argue over the pros and cons of legislation forbidding trading by informed insiders. Yet a lack of reliable empirical data about the effects of such legislation inhibits a conclusive scientific evaluation. We overcome this problem by resorting to laboratory markets and find that insider legislation has significant negative effects on multiple market dimensions: under insider legislation, (1) markets are less liquid, (2) markets are less informationally efficient, and (3) uninformed traders׳ earnings (before redistribution of illicit insider gains) are lower.

Source: Journal of Financial Markets

DOI: 10.1016/j.finmar.2016.07.002

Authors: Stefan Palan, Thomas Stöckl

Institutions: University of Graz, Universität Innsbruck, Management Center Innsbruck

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: $1,283