Premium
Time‐Varying Liquidity Trading, Private Information and Insider Trading
Author(s) -
Lei Qin,
Wang Xuewu
Publication year - 2014
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/j.1468-036x.2011.00634.x
Subject(s) - insider trading , market liquidity , business , insider , private information retrieval , exploit , alternative trading system , algorithmic trading , dark liquidity , high frequency trading , electronic trading , monetary economics , trading turret , financial system , finance , open outcry , economics , computer security , computer science , political science , law
This paper investigates the insider trading before scheduled versus unscheduled corporate announcements to explore how corporate insiders utilise their private information in response to the time‐varying liquidity trading. Using a comprehensive insider trading database, we show that: (1) the insider's propensity to trade increases in the amount of liquidity trading before both the scheduled and unscheduled announcements; (2) insiders buy (sell) more before positive (negative) announcements; and (3) insider purchases are more profitable before unscheduled announcements than before scheduled ones. They suggest that insiders time their trades around scheduled and unscheduled announcements to exploit the varying extent of liquidity trading.