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Intraday Behavior of Stock Prices and Trades around Insider Trading
Author(s) -
Inci A. Can,
Lu Biao,
Seyhun H. Nejat
Publication year - 2010
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/j.1755-053x.2009.01075.x
Subject(s) - insider , insider trading , shareholder , monetary economics , stock (firearms) , business , stock price , stock market , order (exchange) , financial economics , economics , finance , corporate governance , mechanical engineering , paleontology , horse , series (stratigraphy) , political science , law , biology , engineering
Our evidence indicates that insiders’ trades provide significant new information to market participants and they are incorporated more fully in stock prices as compared to noninsiders’ trades. We find that market professionals do not front‐run insiders’ trades. Both insiders’ purchases and sales result in significant contemporaneous and subsequent price impact, while sales by large shareholders result in a contemporaneous stock price decline that is subsequently reversed. The arrival of insider purchases reverse the prevailing negative order imbalances from third party trades and lead to piggy‐backing by market professionals resulting in subsequent market purchase orders as well as stock price increases.