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Time†Varying Liquidity Trading, Private Information and Insider Trading

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  • Qin Lei
  • Xuewu Wang

Abstract

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.

Suggested Citation

  • Qin Lei & Xuewu Wang, 2014. "Time†Varying Liquidity Trading, Private Information and Insider Trading," European Financial Management, European Financial Management Association, vol. 20(2), pages 321-351, March.
    • Handle: RePEc:bla:eufman:v:20:y:2014:i:2:p:321-351
    DOI: 10.1111/j.1468-036X.2011.00634.x
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    2. Dagmar Linnertová & Oleg Deev, 2015. "Insider Trading Activities and Returns of German Blue Chips," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 63(6), pages 1995-2003.
    3. Liyi Zheng, 2020. "The type of corporate announcements and its implication on trading behaviour," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(S1), pages 629-659, April.

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