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The Association between Insider Trading and Information Announcements

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  • John Elliott
  • Dale Morse
  • Gordon Richardson
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    Abstract

    Prior knowledge of certain public information events can lead to abnormal returns on securities. Insiders generally have access to information before the public. Several studies have shown that abnormal returns are earned by portfolios which are constructed on the basis of the trading behavior of corporate insiders. We test whether this demonstrably profitable trading is associated with the public release of information about earnings, dividends, bond ratings, mergers, and bankruptcies. The results are weakly consistent with some use of private information, but most insider trading appears to be unrelated to these information events.

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    Bibliographic Info

    Article provided by The RAND Corporation in its journal RAND Journal of Economics.

    Volume (Year): 15 (1984)
    Issue (Month): 4 (Winter)
    Pages: 521-536

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    Handle: RePEc:rje:randje:v:15:y:1984:i:winter:p:521-536

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    Cited by:
    1. Julan Du & Shang-Jin Wei, 2004. "Does Insider Trading Raise Market Volatility?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 114(498), pages 916-942, October.
    2. Kraft, Anastasia & Lee, Bong Soo & Lopatta, Kerstin, 2014. "Management earnings forecasts, insider trading, and information asymmetry," Journal of Corporate Finance, Elsevier, Elsevier, vol. 26(C), pages 96-123.
    3. Agrawal, Anup & Jaffe, Jeffrey F., 1995. "Does Section 16b deter insider trading by target managers?," Journal of Financial Economics, Elsevier, Elsevier, vol. 39(2-3), pages 295-319.

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