Insiders’ Market Timing and Real Activity: Evidence From an Emerging Market

  • Tomasz Piotr Wisniewski
Part of the Centre for the Study of Emerging Markets Series book series (CSEM)

Abstract

Earlier research on insider trading has documented unequivocally that officers, directors and controlling shareholders are in possession of valuable private information and exploit it profitably in security trading.1 It is widely believed that the apparent informational asymmetry arises from the foreknowledge of public disclosures. Consequently, a number of studies have investigated the intensity of insider trading prior to corporate events, such as takeover bids (Seyhun, 1990), dividend and earnings announcements (John and Lang, 1991; Ke, Huddart and Petroni, 2003), stock repurchases (Lee, Mikkelson and Partch, 1992), or bankruptcies (Seyhun and Bradley, 1997).

Keywords

Europe Covariance Autocorrelation 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Akaike, H. (1973) ‘Information Theory and an Extension of the Maximum Likelihood Principle’, in B.N. Petrov and F. Csáki (eds), The 2nd International Symposium on Information Theory (Budapest: Akadémiai Kiadó), pp. 267–81.Google Scholar
  2. Akaike, H. (1974) ‘A New Look at the Statistical Model Identification’, IEEE Transactions on Automatic Control, vol. 19, pp. 716–23.CrossRefGoogle Scholar
  3. Bettis, J.C., Coles, J.L. and Lemmon, M.L. (2000) ‘Corporate Policies Restricting Trading by Insiders’, Journal of Financial Economics, vol. 57, pp. 191–220.CrossRefGoogle Scholar
  4. Bhattacharya, U., Daouk, H., Jorgenson, B. and Kehr, C. (2000) ‘When an Event is not an Event: the Curious Case of an Emerging Market’, Journal of Financial Economics, vol. 55, pp. 69–101.CrossRefGoogle Scholar
  5. Bhattacharya, U. and Daouk, H. (2002) ‘The World Price of Insider Trading’, Journal of Finance, vol. 57, pp. 75–108.CrossRefGoogle Scholar
  6. Black, F. (1986) ‘Noise’, Journal of Finance, vol. 41, pp. 529–43.CrossRefGoogle Scholar
  7. Bainbridge, S.M. (2000) ‘Insider Trading: An Overview’, in Encyclopedia of Law and Economics, Vol. III, pp. 772–812.Google Scholar
  8. Chen, N., Roll, R. and Ross, S. (1986) ‘Economic Forces and the Stock Market’, Journal of Business, vol. 59, pp. 383–403.CrossRefGoogle Scholar
  9. Choi, J.J., Hauser, S. and Kopecky, K.J. (1999) ‘Does the Stock Market Predict Real Activity? Time Series Evidence from the G-7 Countries’, Journal of Banking and Finance, 23, pp. 1771–92.CrossRefGoogle Scholar
  10. Chowdhury, M., Howe, J.S. and Lin, J. (1993) ‘The Relation between Aggregate Insider Transactions and Stock Market Returns’, Journal of Financial and Quantitative Analysis, vol. 28, pp. 431–7.CrossRefGoogle Scholar
  11. Del Brio, E.B., Miguel, A. and Perote, J. (2002) ‘An Investigation of Insider Trading Profits in the Spanish Stock Market’, Quarterly Review of Economics and Finance, vol. 42, pp. 73–94.CrossRefGoogle Scholar
  12. Fama, E.F. (1981) ‘Stock Returns, Real Activity, Inflation, and Money’, American Economic Review, vol. 71, pp. 545–65.Google Scholar
  13. Finnerty, J.E. (1976) ‘Insiders and Market Efficiency’, Journal of Finance, vol. 31, pp. 1141–8.CrossRefGoogle Scholar
  14. Givoly, D. and Palmon, D. (1985) ‘Insider Trading and the Exploitation of Inside Information: Some Empirical Evidence’, Journal of Business, vol. 58, pp. 69–87.CrossRefGoogle Scholar
  15. Granger, C.W.J. (1969) ‘Investigating Casual Relations by Econometric Models and Cross Spectral Methods’, Econometrica, vol. 37, pp. 424–38.CrossRefGoogle Scholar
  16. Hamilton, J.D. (1994) Time Series Analysis (Princeton: Princeton University Press) pp. 257–349.Google Scholar
  17. Hannan, E.J. and Quinn, B.G. (1979) ‘The Determination of the Order of Autoregression’, Journal of the Royal Statistical Society, vol. 41, pp. 190–5.Google Scholar
  18. Hosking, J.R.M. (1980) ‘The Multivariate Portmanteau Statistic’, Journal of the American Statistical Association, vol. 75, pp. 602–8.CrossRefGoogle Scholar
  19. Iqbal, Z. and Shetty, S. (2002) ‘An Investigation of Causality between Insider Transactions and Stock Returns’, Quarterly Review of Economics and Finance, vol. 42, pp. 41–57.CrossRefGoogle Scholar
  20. Jaffe, J. (1974) ‘Special Information and Insider Trading’, Journal of Business, vol. 47, pp. 410–28.CrossRefGoogle Scholar
  21. John, K. and Lang, L. (1991) ‘Strategic Insider Trading around Dividend Announcements: Theory and Evidence’, Journal of Finance, vol. 46, pp. 1361–89.CrossRefGoogle Scholar
  22. Ke, B., Huddart, S. and Petroni, K. (2003) ‘What Insiders Know about Future Earnings and How They Use it: Evidence From Insider Trades’, Journal of Accounting and Economics, vol. 35, pp. 315–46.CrossRefGoogle Scholar
  23. Lakonishok, J. and Lee, I. (2001) ‘Are Insider Trades Informative?’, Review of Financial Studies, vol. 14, pp. 79–111.CrossRefGoogle Scholar
  24. Lee, B. (1992) ‘Causal Relationships Among Stock Returns, Interest Rates, Real Activity, and Inflation’, Journal of Finance, vol. 47, pp. 1591–603.Google Scholar
  25. Lee, D.S., Mikkelson, W.H. and Partch, M.M. (1992) ‘Managers’ Trading Around Stock Repurchases’, Journal of Finance, vol. 47, pp. 1947–61.CrossRefGoogle Scholar
  26. Lin, J. and Howe, J. (1990) ‘Insider Trading in the OTC Market’, Journal of Business, vol. 45, pp. 1273–84.Google Scholar
  27. Lorie, J.H. and Niederhoffer, V. (1968) ‘Predictive and Statistical Properties of Insider Trading’, Journal of Law and Economics, vol. 11, pp. 35–51.CrossRefGoogle Scholar
  28. Lucas, R.E., Jr. (1973) ‘Some International Evidence on Output-Inflation Tradeoffs’, American Economic Review, vol. 63, pp. 326–34.Google Scholar
  29. Lucas, R.E., Jr. (1975) ‘An Equilibrium Model of the Business Cycle’, Journal of Political Economy, vol. 83, pp. 1113–44.CrossRefGoogle Scholar
  30. Lütkepohl, H. (1985) ‘Comparison of Criteria for Estimating the Order of a Vector Autoregressive Process’, Journal of Time Series Analysis, vol. 6, pp. 35–52.CrossRefGoogle Scholar
  31. Mehra, Y.P. (1978) ‘Is Money Exogenous in Money-Demand Equations’, Journal of Political Economy, vol. 86, pp. 211–28.CrossRefGoogle Scholar
  32. Phelps, E. and Zoega, G. (2001) ‘Structural Booms. Productivity Expectations and Asset Valuations’, Economic Policy, vol. 32, pp. 83–126.Google Scholar
  33. Rissanen, J. (1978) ‘Modeling by Shortest Data Description’, Automatica, vol. 14, pp. 465–71.CrossRefGoogle Scholar
  34. Rozeff, M.S. and Zaman, M.A. (1988) ‘Market Efficiency and Insider Trading: New Evidence’, Journal of Business, vol. 61, pp. 25–44.CrossRefGoogle Scholar
  35. Schwarz, G. (1978) ‘Estimating the Dimension of a Model’, Annals of Statistics, vol. 6, pp. 461–4.CrossRefGoogle Scholar
  36. Schwert, G.W. (1990) ‘Stock Returns and Real Activity: A Century of Evidence’, Journal of Finance, vol. 45, pp. 1237–57.CrossRefGoogle Scholar
  37. Seyhun, N.H. (1986) ‘Insiders’ Profits, Costs of Trading, and Market Efficiency’, Journal of Financial Economics, vol. 16, pp. 189–212.Google Scholar
  38. Seyhun, N.H. (1988a) ‘The Information Content of Aggregate Insider Trading’, Journal of Business, vol. 61, pp. 1–24.CrossRefGoogle Scholar
  39. Seyhun, N.H. (1988b) ‘The January Effect and Aggregate Insider Trading’, Journal of Finance, vol. 43, pp. 129–41.CrossRefGoogle Scholar
  40. Seyhun, N.H. (1990) ‘Do Bidder Managers Knowingly Pay too Much?’, Journal of Business, vol. 63, pp. 439–64.CrossRefGoogle Scholar
  41. Seyhun, N.H. (1992) ‘Why Does Aggregate Insider Trading Predict Future Stock Returns?’, Quarterly Journal of Economics, vol. 107, pp. 1303–31.CrossRefGoogle Scholar
  42. Seyhun, N.H. and Bradley, M. (1997) ‘Corporate Bankruptcy and Insider Trading’, Journal of Business, vol. 70, pp. 189–216.CrossRefGoogle Scholar
  43. Seyhun, N.H. (2000) Investment Intelligence from Insider Trading (Cambridge, MA: MIT Press).Google Scholar
  44. Sims, C.A. (1980a) ‘Comparison of Interwar and Postwar Business Cycles: Monetarism Reconsidered’, American Economic Review, vol. 70, pp. 250–7.Google Scholar
  45. Sims, C.A. (1980b) ‘Macroeconomics and Reality’, Econometrica, vol. 48, pp. 1–46.CrossRefGoogle Scholar
  46. White, H. (1980) ‘Heteroscedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroscedasticity’, Econometrica, vol. 48, pp. 817–38.CrossRefGoogle Scholar
  47. Wisniewski, T.P. and Bohl, M. (2005) ‘The Information of Registered Insider Trading under Lax Law Enforcement’, forthcoming in the International Review of Law and Economics.Google Scholar

Copyright information

© Tomasz Piotr Wisniewski 2005

Authors and Affiliations

  • Tomasz Piotr Wisniewski

There are no affiliations available

Personalised recommendations