INSIDER TRADING WITHOUT NORMALITY

In this paper, we analyse the existence and uniqueness of equilibrium in a particular class of monopolistic rational expectations models. We show the equivalence between the Kyle (1985) model of insider trading where the insider observes the amount of noise trading and the Kyle ( 1989) model of informed speculation when there is one risk-neutral ins ider and many risk-neutral market makers. We show that in these two eq uivalent models: (i) There exists a unique equilibrium independently o f the distribution of uncertainty; (ii) This equilibrium minimized the expected gains of the informed agent under incentive compatibility co nstraints. We extend our results to a class of signalling games.