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New paper on insider trading regulation and market efficiency

posted Feb 5, 2018, 2:20 AM by Graz FinanceResearch   [ updated Feb 5, 2018, 2:20 AM ]
A new paper by FiRe member Stefan Palan and h
is co-author, Thomas Stöckl, titled "When chasing the offender hurts the victim: The case of insider legislation", has recently been published in the Journal of Financial Markets. The authors find that legislation forbidding insider trading has significant negative effects on multiple market dimensions. They find that 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.