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Insider Trading in the Swiss Stock Market

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  • Andreas Zingg
  • Sebastian Lang
  • Daniela Wyttenbach
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    Abstract

    Many studies on insider trading are based on data of the U.S. market and conclude that insiders can earn abnormal profits. This paper examines for the Swiss stock market whether insiders can earn abnormal profits and whether outsiders can make abnormal profits by mimicking the transactions of insiders. We find significant abnormal returns for insider trading, as well as some evidence for profitable mimicking strategies. We can reject the strong form Efficient Market Hypothesis for the Swiss stock market. However, with regard to the semi-strong form Efficienct Market Hypothesis, it remains unclear whether it is true for the Swiss stock market.

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    File URL: http://www.sjes.ch/papers/2007-III-4.pdf
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    Bibliographic Info

    Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

    Volume (Year): 143 (2007)
    Issue (Month): III (September)
    Pages: 331-362

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    Handle: RePEc:ses:arsjes:2007-iii-4

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    Postal: c/o SNB/BNS, Börsenstrasse 15, PO Box 2800, CH-8022 Zürich
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    Web page: http://www.sjes.ch
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    Related research

    Keywords: Insider trading; event study; management transactions; efficient market hypothesis;

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    References

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    1. Sylvain Friederich & Alan Gregory & John Matatko & Ian Tonks, 2002. "Short-run Returns around the Trades of Corporate Insiders on the London Stock Exchange," European Financial Management, European Financial Management Association, vol. 8(1), pages 7-30.
    2. Jaffe, Jeffrey F, 1974. "Special Information and Insider Trading," The Journal of Business, University of Chicago Press, vol. 47(3), pages 410-28, July.
    3. Fidrmucova, J. & Goergen, M. & Renneboog, L.D.R., 2005. "Insider Trading, News Releases and Ownership Concentration," Discussion Paper 2005-025, Tilburg University, Tilburg Law and Economic Center.
    4. Mikkelson, Wayne H. & Partch, M. Megan, 1988. "Withdrawn Security Offerings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(02), pages 119-133, June.
    5. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    6. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    7. Finnerty, Joseph E, 1976. "Insiders and Market Efficiency," Journal of Finance, American Finance Association, vol. 31(4), pages 1141-48, September.
    8. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    9. Wisniewski, Tomasz P. & Bohl, Martin T., 2005. "The Information Content of Registered Insider Trading Under Lax Law Enforcement," International Review of Law and Economics, Elsevier, vol. 25(2), pages 169-185, June.
    10. John, Kose & Mishra, Banikanta, 1990. " Information Content of Insider Trading Around Corporate Announcements: The Case of Capital Expenditures," Journal of Finance, American Finance Association, vol. 45(3), pages 835-55, July.
    11. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
    12. John Matatko & Alan Gregory & Ian Tonks & Richard Purkis, 1993. "UK Directors Trading: The Impact of Dealings in Smaller Firms," FMG Discussion Papers dp160, Financial Markets Group.
    13. Cheuk, Man-Yin & Fan, Dennis K. & So, Raymond W., 2006. "Insider trading in Hong Kong: Some stylized facts," Pacific-Basin Finance Journal, Elsevier, vol. 14(1), pages 73-90, January.
    14. Seyhun, H. Nejat, 1986. "Insiders' profits, costs of trading, and market efficiency," Journal of Financial Economics, Elsevier, vol. 16(2), pages 189-212, June.
    15. Rozeff, Michael S & Zaman, Mir A, 1988. "Market Efficiency and Insider Trading: New Evidence," The Journal of Business, University of Chicago Press, vol. 61(1), pages 25-44, January.
    16. Patell, James M. & Wolfson, Mark A., 1979. "Anticipated information releases reflected in call option prices," Journal of Accounting and Economics, Elsevier, vol. 1(2), pages 117-140, August.
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    Cited by:
    1. Kaspar Dardas & Andre Güttler, 2011. "Are directors’ dealings informative? Evidence from European stock markets," Financial Markets and Portfolio Management, Springer, vol. 25(2), pages 111-148, June.

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