An experiment examining insider trading with respect to different market structures
As theoretical and empirical approaches suffer some shortcomings if it comes to analyzing insiders’ behavior, we conducted an adequate experiment. The experimental design incorporates traders with perfect information of the fundamental value of the tradeable asset. These insiders compete with regular uninformed participants on different market structures, in particular on a transparent and on an intransparent call market as well as on a continuous double auction. The results shed first light on a couple of interesting issues, including whether and how insiders try to stay undetected, how their profits are accumulated and what market structure is more advantageous for insiders.
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