Weak Insider Trading and Behavioral Finance
Résumé
In this paper, we study the optimal portfolio selection problem for weakly informed traders in the sense of Baudoin \cite{Baudoin_2002}. Apart from expected utility maximizers, we consider investors with other preference paradigms. In particular, we consider agents following cumulative prospect theory as developed by Kahneman and Tversky \cite{Kahneman_Tversky_1992}, Yaari's dual theory of choice \cite{Yaari_1987} as well as the so-called goal reaching maximizers. For any of such agents, we solve the corresponding optimization problems, in both non-informed and informed case, i.e. when the agent has an additional weak information. At last, comparison results among investors with different preferences and information sets are given, together with explicit examples. In particular, the insider's gain, i.e. the difference between the optimal values of an informed and a non informed investor, is explicitly evaluated.
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