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Striking up with the in crowd: When option markets and insiders agree

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  • Gilstrap, Collin
  • Petkevich, Alex
  • Teterin, Pavel

Abstract

We study whether the trading behavior of corporate insiders provides additional information to the market, after controlling for the public information integrated by sophisticated investors. First, we establish that insiders and option market participants trade in the same direction on average. Second, we show that insidertrading is relatively more informed when the option market sentiment is positive. The marginal information content of insider trades is higher for firms with higher levels of information asymmetry and during time periods when future economic conditions are less certain.

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  • Gilstrap, Collin & Petkevich, Alex & Teterin, Pavel, 2020. "Striking up with the in crowd: When option markets and insiders agree," Journal of Banking & Finance, Elsevier, vol. 120(C).
    • Handle: RePEc:eee:jbfina:v:120:y:2020:i:c:s0378426620302259
    DOI: 10.1016/j.jbankfin.2020.105963
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    More about this item

    Keywords

    Insiders; Volatility spread; Predictability;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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