Weak Insider Trading and Behavioral Finance
Campi, Luciano; Del Vigna, Matteo (2012), Weak Insider Trading and Behavioral Finance, SIAM Journal on Financial Mathematics, 3, 1, p. 242-279. http://dx.doi.org/10.1137/110824693
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http://hal.archives-ouvertes.fr/hal-00566185/fr/Date
2012Nom de la revue
SIAM Journal on Financial MathematicsVolume
3Numéro
1Éditeur
SIAM
Pages
242-279
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In this paper, we study the optimal portfolio selection problem of weakly informed traders in the sense of Baudoin \cite{Baudoin_2002}. Instead of considering only expected utility maximizers, we also take into consideration different preference paradigms. In particular, we analyze a representative agent who follows the tenets of cumulative prospect theory as developed by Kahneman and Tversky \cite{Kahneman_Tversky_1992}, together with an investor acting as in Yaari's dual theory of choice \cite{Yaari_1987} and a trader who faces the so-called goal reaching maximizer. For everyone of these different maximizers, we frame the corresponding optimization problems, one in the non-informed case and the other one when the agent possesses a weak information. At last, comparison results among different types of investor and differently informed investor are given, together with explicit examples. Specifically, the insider's gain, or the difference between the optimal values of an informed and a non informed investor, is explicitly evaluated.Mots-clés
probability distorsion; goal reaching maximizer; weak information; insider trading; behavioral finance; Yaari’s dual theory of choice; loss aversionPublications associées
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Campi, Luciano; Cetin, Umut; Danilova, Albina (2011) Article accepté pour publication ou publié