ABSTRACT
In Section 1.2, I model the economic losses that arise for risk-averse traders. I then model the diversion of economic surpluses from all traders to insiders as a consequence of insider trading and discuss the social welfare consequences if inside traders consume valuable resources to garner such information. In Section 1.4 and Section 1.5, I discuss the depressing eect such insider trading has on the rate of return for securities, with the implication of reduced capital formation.
