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An unreliable canary: Insider trading, the cash flow hypothesis and the financial crisis

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  • Lambe, Brendan J.

Abstract

This paper investigates whether measures of aggregated insider trading could have predicted the wider economic change that occurred in the UK around the time of the financial crisis. Seyhun's (1988, 1992) cash flow hypothesis is the underpinning rationale driving the investigation. Within a vector auto-regressive framework, this study disentangles the relationship between returns and the activities of insiders in UK listed firms in order to validate Seyhun's assertions in this context. Findings suggest that, unlike the US, the relationship is not present. Instead, aggregate measures of trading decisions show that insiders are more likely driven by public perception than by private information.

Suggested Citation

  • Lambe, Brendan J., 2016. "An unreliable canary: Insider trading, the cash flow hypothesis and the financial crisis," International Review of Financial Analysis, Elsevier, vol. 46(C), pages 151-158.
    • Handle: RePEc:eee:finana:v:46:y:2016:i:c:p:151-158
    DOI: 10.1016/j.irfa.2016.05.005
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    References listed on IDEAS

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    Cited by:

    1. Lambe, Brendan & Li, Zhiyong & Qin, Weiping, 2022. "Uncertain times and the insider perspective," International Review of Financial Analysis, Elsevier, vol. 81(C).

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    More about this item

    Keywords

    Insider trading; Cash flow hypothesis;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • K20 - Law and Economics - - Regulation and Business Law - - - General

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