The dog that did not bark: Insider trading and crashes
AbstractThis paper documents that at the individual stock level insiders sales peak many months before a large drop in the stock price, while insiders purchases peak only the month before a large jump. We provide a theoretical explanation for this phenomenon based on trading constraints and asymmetric information. We test our hypothesis against competing stories such as patterns of insider trading driven by earnings announcement dates, or insiders timing their trades to evade prosecution. Finally we provide new evidence regarding crashes and the degree of information asymmetry.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 948.
Date of creation: Mar 2006
Date of revision:
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Web page: http://www.econ.upf.edu/
Insider Trading; Rational Expectations Equilibrium; Trading Constraints; Volatility; Crashes;
Other versions of this item:
- Jose M. Marin & Jacques P. Olivier, 2008. "The Dog That Did Not Bark: Insider Trading and Crashes," Journal of Finance, American Finance Association, vol. 63(5), pages 2429-2476, October.
- José M. Marín & Jacques Olivier, 2007. "The dog that did not bark: Insider trading and crashes," Working Papers 2007-20, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
- Marín Vigueras, José Maria & Olivier, Jacques, 2007. "The Dog that Did Not Bark: Insider Trading and Crashes," CEPR Discussion Papers 6244, C.E.P.R. Discussion Papers.
- Jacques Olivier & José M. Marin, 2006. "The Dog That Did Not Bark: Insider Trading and Crashes," Working Papers 241, Barcelona Graduate School of Economics.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- 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
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
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