The Effect Of Insider Trading Behaviors With Different Preferences On Market Equilibrium In Financial Markets

This paper specifically investigates two scenarios in financial markets,one is the inside trading behavior in financial markets with transaction costs and noisy traders with asset information correlation,and the other is the trading behavior of overconfident risk-neutral inside trader and risk-averse inside trader in the market deviating from semi-strong efficiency.Unique linear equilibrium models are developed to analyze the effects of transaction cost coefficient and deviation coefficient on the market equilibrium separately.When inside traders have transaction costs and noise traders have positive or negative correlation of asset information,this paper finds that the presence of transaction costs softens the competition between noise traders and risk averse inside traders when noise traders have positive information correlation;when noise traders have negative information correlation,transaction costs increase the price effectiveness for risk averse inside traders,the most interesting finding is that for risk-neutral inside traders,transaction costs stimulate their trading instead.In our financial markets,especially when noise traders are correctly guided or misguided by inside traders,the market should raise transaction costs in order to maintain fairness in financial markets and protect the interests of noise traders.When the overconfident risk-neutral inside trader and the risk-averse inside trader are in a market that deviates from semi-strong efficiency,this paper finds that the larger the deviation coefficient,the greater the asymmetry in trading volume between the two inside traders,and the most important finding is that the market deviation coefficient makes the profits and trading volume of both inside traders larger,but compared to the profits of the overconfident risk-neutral inside trader,the profits of the risk-averse inside trader are instead larger,and the market deviation coefficient is more favorable to the risk-averse inside trader.The market deviation coefficient is not conducive to the longevity of the market,and it is important to improve the effectiveness of the market.