Impact of the Secondary Insider Trading on Financial Markets

• Authors: A. Jakimowicz , A. Baklarz , K. Smulska
• Languages of publication: EN

Abstracts

EN

The insider trading phenomenon is based on the situation when traders use material information not publicly available to make their investment decisions. In most countries of the world, insider trading is illegal and is punishable by fine or imprisonment. Insider trading has many economic effects, which in the light of available scientific research can be both positive and negative. Insider traders can be divided into primary and secondary traders depending on whether their contact with insider information is direct or indirect. Primary insider trading has been discussed in many research studies and scientific descriptions, while secondary insider trading has not been investigated yet. This paper's aim is to fill this gap. Since the empirical data for secondary insider trading is in practice impossible to obtain, the research analysis is based on simulations of two probabilistic models. The first one concerns the use of insider information for an infinite long period of time after its acquisition, while the second one on the day of its receipt. The results of the simulation are related to three basic models of financial market functioning: the efficient market hypothesis, the fractal market hypothesis, and the coherent market hypothesis.

Keywords

EN

89.65.Gh; 02.70.-c

Discipline

• 02.70.-c: Computational techniques; simulations(for quantum computation, see 03.67.Lx; for computational techniques extensively used in subdivisions of physics, see the appropriate section; for example, see 47.11.-j Computational methods in fluid dynamics)
• 89.65.Gh: Economics; econophysics, financial markets, business and management(for economic issues regarding production and use of renewable energy, see 88.05.Lg)

• Publisher: Institute of Physics, Polish Academy of Sciences
• Journal: Acta Physica Polonica A
• Year: 2018
• Volume: 133
• Issue: 6
• Pages: 1394-1401

Dates

published

2018-06

Contributors

author

A. Jakimowicz

• Institute for Market, Consumption and Business Cycles Research - National Research Institute, Al. Jerozolimskie 87, PL-02001 Warsaw, Poland

author

A. Baklarz

• Faculty of Management, University of Warsaw, Szturmowa 1/3, PL-02678 Warsaw, Poland

author

K. Smulska

• WSB University, Młodzieżowa 31A, PL-87100 Toruń, Poland

Identifiers

DOI

10.12693/APhysPolA.133.1394