The Analysis Of The Insider's Trading Behavior

Considering the insider's problem of information, this paper is based on the Kyle(1985)'s model, which mainly analyzes the insider's trading behavior, and is composed of the following four parts.In the second part, it is assumed reasonably that insider can not observe the ex post liquidation value of the risky asset exactly, but they can get the correlative value signal. The distortion of signal is attributed that a random occurrence which is correlative with value of the risk asset. With the hypothesis above, Kyle(1985)model is made use of the researching. It is find that the distortion of signal observably effects the market depth, the informative ness of price and the insider's trading.In the third part, the conclusions of the model described in the second part are compared with a known model, in which the signal was described as the linear function of the value. After the contrast, the causation and approach of the signal's effects is clearer.In the fourth part, the single auction model described in the second part is developed to the sequential auction model and the continuous auction model respectively. In these models, there still are the effects of the signal. It is showed that in the continuous auction model the market depth is a constant, as the Kyle(1985)model showed, but in our model this constant market depth is effected by the distortion of signal.