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Price Revelation from Insider Trading: Evidence from Hacked Earnings News

Author

Listed:
  • Akey, Pat
  • Grégoire, Vincent

    (HEC Montréal)

  • Martineau, Charles

    (University of Toronto)

Abstract

From 2010 to 2015, a group of traders illegally accessed earnings information before their public release by hacking several newswire services. We use this scheme as a natural experiment to investigate how informed investors select among private signals and how efficiently financial markets incorporate private information contained in trades into prices. We construct a measure of qualitative information using machine learning and find that the hackers traded on both qualitative and quantitative signals. The hackers’ trading caused 15% more of the earnings news to be incorporated in prices before their public release. Liquidity providers responded to the hackers’ trades by widening spreads.

Suggested Citation

  • Akey, Pat & Grégoire, Vincent & Martineau, Charles, 2021. "Price Revelation from Insider Trading: Evidence from Hacked Earnings News," SocArXiv qe6tu, Center for Open Science.
    • Handle: RePEc:osf:socarx:qe6tu
    DOI: 10.31219/osf.io/qe6tu
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