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The Harm From Insider Trading and Informed Speculation

Michael Manove
The Quarterly Journal of Economics
Vol. 104, No. 4 (Nov., 1989), pp. 823-845
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/2937869
Page Count: 23
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The Harm From Insider Trading and Informed Speculation
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Abstract

Insiders traders and other speculators with private information are able to appropriate some part of the returns to corporate investments made at the expense of other shareholders. As a result, insider trading tends to discourage corporate investment and reduce the efficiency of corporate behavior. In the context of a theoretical model, measures that provide some indication of the sources and extent of the investment reduction are derived.

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