Market efficiency and insider trading: new evidence

Article Abstract:

The ability of outsiders to earn abnormal returns using publicly available insider trading data is a serious exception to stock market efficiency. These anomalous profits to outsiders are a manifestation of the effects of size and price-earnings ratio. When these factors are controlled, outsider profits are reduced by half. Assuming an additional 2 percent transactions cost completely eliminates outsider profits. Assuming 2 percent transaction costs leaves insider profits at 3 percent per annum for each annual holding period.

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The information content of aggregate insider trading

Article Abstract:

The information content of aggregate insider trading is examined. About 60,000 open market sales and purchases by insiders between Jan 1975 and Oct 1981 were used in the study. The relation between market movements and aggregate insider trading is analyzed. The results indicate that the distinctions between firm-specific factors and economy-wide factors are not always apparent to insiders. The usefulness of publicly available insider trading information in predicting future stock market returns is also examined.

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Corporate bankruptcy and insider trading

Article Abstract:

The increasing number of bankruptcies during the past five years have resulted in research pertaining to insider trading activities by corporate managers. Empirical evidence suggests that insiders dispose of their stocks months or years prior to bankruptcy filing to prevent significant losses. Insider trading is initiated five years preceding the filing and reaches its zenith during the announcement month. Results also show that insider trading is more intense in the top management bracket.

Bankruptcy

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