Public Disclosure and Dissimulation of Insider Trades

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Public Disclosure and Dissimulation of Insider Trades

Author Info

Huddart, Steven
Hughes, John S
Levine, Carolyn B

Additional information is available for the following registered author(s):

Steven J. Huddart

Abstract

Regulation requiring insiders to publicly disclose their stock trades after the fact complicates the trading decisions of informed, rent-seeking insiders. Given this requirement, we present an insider's equilibrium trading strategy in a multiperiod rational expectations framework. Relative to Kyle (1985), price discovery is accelerated and insider profits are lower. The strategy balances immediate profits from informed trades against the reduction in future profits following trade disclosure and, hence, revelation of some of the insider's information. Our results offer a novel rationale for contrarian trading: dissimulation, a phenomenon distinct from manipulation, may underlie insiders' trading decisions.

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Publisher Info
Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 69 (2001)
Issue (Month): 3 (May)
Pages: 665-81
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Handle: RePEc:ecm:emetrp:v:69:y:2001:i:3:p:665-81

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Archishman Chakraborty & Bilge Yilmaz, . "Nested Information and Manipulation in Financial Markets," Rodney L. White Center for Financial Research Working Papers 6-00, Wharton School Rodney L. White Center for Financial Research. [Downloadable!]
Other versions:
- Archishman Chakraborty & Bilge Yilmaz, . "Nested Information and Manipulation in Financial Markets," Rodney L. White Center for Financial Research Working Papers 06-00, Wharton School Rodney L. White Center for Financial Research. [Downloadable!]
Archishman Chakraborty & Bilge Yilmaz, . "Informed Manipulation," Rodney L. White Center for Financial Research Working Papers 07-00, Wharton School Rodney L. White Center for Financial Research. [Downloadable!]
Other versions:
- Archishman Chakraborty & Bilge Yilmaz, . "Informed Manipulation," Rodney L. White Center for Financial Research Working Papers 7-00, Wharton School Rodney L. White Center for Financial Research. [Downloadable!]
- Chakraborty, Archishman & Yilmaz, Bilge, 2004. "Informed manipulation," Journal of Economic Theory, Elsevier, vol. 114(1), pages 132-152, January. [Downloadable!] (restricted)
Giovanni Cespa, 2007. "Information Sales and Insider Trading with Long-lived Information," CSEF Working Papers 174, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
Hans Degryse & Frank de Jong & Jérémie Lefebvre, 2009. "An Empirical Analysis of Legal Insider Trading in the Netherlands," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Other versions:
- Degryse, H.A. & Jong, F.C.J.M. de & Lefebvre, J.J.G., 2009. "An Empirical Analysis of Legal Insider Trading in the Netherlands," Discussion Paper 2009-48, Tilburg University, Center for Economic Research. [Downloadable!]
Steven Huddart & Bin Ke & Charles Shi, 2005. "Jeopardy, non-public information, and insider trading around SEC 10-K and 10-Q filings," Law and Economics 0502001, EconWPA, revised 03 Jul 2005. [Downloadable!]
Other versions:
- Huddart, Steven & Ke, Bin & Shi, Charles, 2007. "Jeopardy, non-public information, and insider trading around SEC 10-K and 10-Q filings," Journal of Accounting and Economics, Elsevier, vol. 43(1), pages 3-36, March. [Downloadable!] (restricted)
Nevzat Eren & Han N. Ozsoylev, 2008. "Hype and Dump Manipulation," OFRC Working Papers Series 2008fe08, Oxford Financial Research Centre. [Downloadable!]
Andrea Buffa & Giovanna Nicodano, 2006. "Should Insider Trading be Prohibited when Share Repurchases are Allowed?," Carlo Alberto Notebooks 16, Collegio Carlo Alberto. [Downloadable!]
Other versions:
- Andrea M. Buffa & Giovanna Nicodano, 2008. "Should Insider Trading be Prohibited when Share Repurchases are Allowed?," Review of Finance, Oxford University Press for European Finance Association, vol. 12(4), pages 735-765. [Downloadable!] (restricted)
Calcagno, R. & Lovo, S.M., 2002. "Market efficiency and price formation when dealers are asymmetrically informed," Discussion Paper 42, Tilburg University, Center for Economic Research. [Downloadable!]
Other versions:
- LOVO, Stefano M. & CALCAGNO, R., 2001. "Market efficiency and Price Formation when Dealers are Asymmetrically Informed," Les Cahiers de Recherche 737, HEC Paris. [Downloadable!]

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