Knowledge Flows and Insider Trading

Howden, David (2014): Knowledge Flows and Insider Trading. Published in: Review of Austrian Economics , Vol. 1, No. 27 (2014): pp. 45-55.

Abstract

Much insider trading literature focuses on the redistribution of monetary rents. This focus has led to ambiguous and conflicting results, unable to identify who the clear winners and losers of insider trading legislation are. Lacking any clearly defined beneficiary, an analysis of the origins and continued support of such legislation is lacking. This paper rectifies this omission by reassessing the involved agents not in light of their relationship to a company, but from all roles of the knowledge transmission process: creator, distributor and user. Information distributors – large news companies and investment houses – are argued to be sufficiently well organized to lobby for maintained and strengthened legislation to protect rents that would otherwise be greatly diminished.

• Item Type: MPRA Paper
• Language: English
• Keywords: insider information, asymmetric information, redistribution, regulation
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law

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