Insider Trading With Private Information Flow And Transaction Cost

This paper mainly studies the trading behavior of insider traders when transaction costs and a series of zero-mean private information flows exist at the same time,and their impact on the market.We find that,regardless of whether transaction costs exist or not,the greater the strength of the private information flow relative to the initial private signal,the more stable the market is in the later part of the transaction,and the more conducive it is for insider traders to ultimately raise their expected profits.In addition,when the number of insider traders in the market is small,the existence of transaction costs or private information flows will lead to a slower rate at which information is incorporated into the price,and the trading intensity of insider traders will decrease;As transaction costs increase or the strength of the private information flow relative to the initial private signal increases,the rate at which information is incorporated into the price slows down,and the price contains less information,that is to say,market efficiency decreases.When the strength of the private information flow is certain and the number of insider traders in the market is small,the smaller the transaction costs,the more conducive it is for insider traders to increase their expected profits;But when there are enough insider traders in the market,the greater the transaction costs,the more profits insider traders expect,however,when there are more competitors for insider traders in the market,insider traders pay more attention to the trading behavior of other traders and less attention to the losses caused by transaction costs.