TY - JOUR
T1 - On the timing of inside trades in a betting market
AU - Schnytzer, Adi
AU - Shilony, Yuval
PY - 2002/6
Y1 - 2002/6
N2 - The paper presents a game-theoretical model to examine the equilibrium timing of insider trades in a market with a finite life span. An example of such a market is that for horse betting, where insiders must bet before the race or their information is of no value. We show that there is no equilibrium in pure strategies but that there is a unique, sub game perfect equilibrium in mixed strategies. The issue arises because waiting to bet may lead to information leaks whereas betting too soon may imply paying too high a price for the bet. We derive empirical hypotheses and test them.
AB - The paper presents a game-theoretical model to examine the equilibrium timing of insider trades in a market with a finite life span. An example of such a market is that for horse betting, where insiders must bet before the race or their information is of no value. We show that there is no equilibrium in pure strategies but that there is a unique, sub game perfect equilibrium in mixed strategies. The issue arises because waiting to bet may lead to information leaks whereas betting too soon may imply paying too high a price for the bet. We derive empirical hypotheses and test them.
KW - Applied Game Theory
KW - Betting
KW - Insider Trading
KW - Market For Contingent Claims
KW - Mixed Strategies
UR - http://www.scopus.com/inward/record.url?scp=84977593762&partnerID=8YFLogxK
U2 - 10.1080/13518470110071164
DO - 10.1080/13518470110071164
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AN - SCOPUS:84977593762
SN - 1351-847X
VL - 8
SP - 176
EP - 186
JO - European Journal of Finance
JF - European Journal of Finance
IS - 2
ER -