Economics, Econometrics and Finance
4 years ago

Insider Trading Regulations Boost Market Prices, Penalize Large Trades.

1 view
The Optimal Enforcement of Insider Trading Regulations
Peter M. DeMarzo, Michael J. Fishman, Kathleen M. Hagerty

Paper Summary

Insider trading regulations help market makers offer better prices by reducing unfair advantages. The best enforcement policy balances these benefits with costs. Investigations are triggered by big trades or price changes. Insiders face heavy penalties for large trades but not for small ones. Insiders trade most aggressively on news leading to moderate price changes.

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