We study insider trading in a dynamic setting. but uninformed, traders choose between projects with different levels insider trading. Insider trading distorts investment assets with less private information. , when investment is sufficiently elastic, insider trading can welfare-enhancing because of more informative . When insiders repeatedly receive information, trade to reveal it when investment information elastic because good news investment and hence future insider . Thus, more information is revealed and agents are exploited lessfrequently insiders. Both effects are Pareto-improving. , we consider various insider-trading regulations.
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Bernhardt et al. (1995) studied this question.
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