How Do Insider Trading Policies Affect the Information Content of Insider Trades?

2012 ◽  
Author(s):  
Millicent Chang ◽  
Marvin Wee
Keyword(s):  
Information Content ◽  
Insider Trading ◽  
Insider Trades

Why are CFO insider trades more informative?

2014 ◽  
Vol 40 (2) ◽  
pp. 157-175 ◽  
Author(s):  
Heather S. Knewtson ◽  
John R. Nofsinger
Keyword(s):  
Information Content ◽  
Insider Trading ◽  
Chief Executive Officers ◽  
Design Methodology ◽  
Chief Executive ◽  
Content Type ◽  
Portfolio Returns ◽  
Insider Trades ◽  
Before And After ◽  
Executive Officers

Purpose – The authors examine whether the stronger information content of chief financial officer (CFO) insider trading relative to that of chief executive officers (CEOs) results from a different willingness to exploit the information asymmetry that exists between executives and outside shareholders (scrutiny hypothesis) or from differing financial acumen between CFOs and CEOs (financial acumen hypothesis). The authors consider the information content of equity purchases for CEOs and CFOs. The paper aims to discuss these issues. Design/methodology/approach – The authors examine purchase-based insider trading portfolio returns before and after the implementation of SOX in firms with high versus low regulation, for routine and opportunistic managers, and in samples of CEOs with prior CFO experience. Findings – The authors provide evidence that SOX affected executives differently and provide support for the scrutiny hypothesis. CFO-based portfolios remain the most profitable post-SOX, but the magnitude of returns has fallen in absolute and relative terms compared to returns for CEOs. Superior financial acumen of CFOs does not appear to be supported. CEO purchase trade returns appear to be lower than CFO returns because CEOs face greater visibility and scrutiny and thus limit their own trading aggressiveness. Originality/value – This research contributes to the literature in explaining why CFOs best CEOs in their insider trading purchases and documents that in the post-SOX period, CFO insider trading superiority disappears.

Does insider trading have information content for the bond market?

1996 ◽  
Vol 20 (3) ◽  
pp. 555-575 ◽  
Author(s):  
Sudip Datta ◽  
Mai E. Iskandar-Datta
Keyword(s):  
Information Content ◽  
Insider Trading ◽  
Bond Market

scholarly journals Effect of insider trading on stock characteristics

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sudipta Kumar Nanda ◽  
Parama Barai
Keyword(s):  
Insider Trading ◽  
Abnormal Return ◽  
Investment Decision ◽  
Least Square ◽  
Content Type ◽  
Insider Trades ◽  
Different Types ◽  
Abnormal Volume ◽  
Novel Method ◽  
The Relationship

PurposeThis paper investigates if investors consider legal insider trading data while making investment decisions. If any investment decision is based on insider transactions, then it will result in abnormal stock characteristics. The purpose of this paper is to investigate if insider trading affects stock characteristics like price, return and volume. The paper further investigates the effect on stock characteristics after the trade of different types of insiders and the relationship between abnormal return and abnormal volume.Design/methodology/approachThe study uses the event study method to measure the abnormal price, return and volume. Two-stage least square regression is used to investigate the relationship between abnormal return and abnormal volume.FindingsThe insider trades affect price, return and volume. The results are identical for both buy and sell transactions. The trades of different types of insiders have diverse effects on stock characteristics. The trades of substantial shareholders give rise to the highest abnormal price and return, whereas the promoters' trades result in the highest abnormal volume. No relationship is detected between abnormal return and volume.Originality/valueA novel method to calculate the abnormal price is proposed. The effect of trading of all types of insiders on stock characteristics is analyzed. The relationship between abnormal return and abnormal volume, after an insider trade, is investigated.

scholarly journals Does the Capital Market Opening Improve the Price Discovery Efficiency of Stock Market? An Empirical Research Based on Shanghai-Hong Kong Stock Connect

2021 ◽  
Vol 2021 ◽  
pp. 1-14
Author(s):  
Xueyan Yu ◽  
Yanbing Yu
Keyword(s):  
Hong Kong ◽  
Stock Market ◽  
Information Content ◽  
Insider Trading ◽  
Capital Market ◽  
Stock Price ◽  
Price Discovery ◽  
Price Information ◽  
Market Opening ◽  
Reaction Speed

Whether capital market opening improves the price discovery efficiency of stock market is an important issue. Shanghai-Hong Kong Stock Connect (hereafter, SHKSC) is a milestone event in the opening up of China’s capital market. Based on SHKSC, using the method of PSM + DID, we study the impact of capital market opening on the price discovery efficiency from two dimensions-stock price information content and price reaction speed to information. Our research shows that capital market opening did not increase stock price information content, but speed up the reaction of price to information. Therefore, capital market opening improves capital market’s price discovery efficiency in terms of response speed of stock price to information. Further analysis shows that capital market opening affects stock price reaction speed through improving market information environment and reducing insider trading, but it has not yet had a substantial impact on listed companies’ earnings quality, which is the main participant in the capital market, and therefore has failed to influence the stock price information content. In order to maximize the effectiveness of capital market opening, it is necessary to introduce more effective policies to improve the information disclosure quality of listed firms and reduce the level of insider trading.

scholarly journals Do Proxies for Informed Trading Measure Informed Trading? Evidence from Illegal Insider Trades

2020 ◽  
Vol 10 (3) ◽  
pp. 397-440 ◽  
Author(s):  
Kenneth R Ahern
Keyword(s):  
Insider Trading ◽  
Sampling Bias ◽  
Informed Trading ◽  
Cross Sectional ◽  
Order Imbalance ◽  
Oxford University ◽  
Insider Trades ◽  
Editorial Decision ◽  
New Evidence ◽  
Bid Ask Spreads

Abstract This paper exploits hand-collected data on illegal insider trades to provide new evidence on the ability of a host of standard measures of illiquidity to detect informed trading. Controlling for unobserved cross-sectional and time-series variation, sampling bias, and strategic timing of insider trades, I find that when information is short-lived, only absolute order imbalance and effective spread are statistically and economically robust predictors of illegal insider trading. However, when information is long-lasting, insiders strategically time their trades to avoid illiquidity, and none of the standard measures considered are reliable predictors, including bid-ask spreads, order imbalance, Kyle’s λ, and Amihud illiquidity. (JEL D53D82G12G14K42) Received: March 14, 2019; Editorial decision: February 18, 2020 by Editor Thierry Foucault. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

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