The impact of public information on insider trading. (English) Zbl 0968.91011
Summary: We study the impact of public information on insider trading in the context of Kyle’s speculative market. The linear Nash equilibrium is characterized analytically. We find that public information is detrimental for the insider and beneficial for the liquidity traders. The insider puts a negative weight on the public information in formulating his optimal strategy. The equilibrium price becomes more informative when there exists public information.
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