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Insider Trading: The Law, The Theory, The Evidence

Author

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  • JEFFRY M. NETTER
  • ANNETTE B. POULSEN
  • PHILIP L. HERSCH

Abstract

This paper reviews the arguments concerning the role and effects of insider trading. In reviewing the law of insider trading, we concentrate on the main elements of the regulatory framework and court interpretations. We discuss economic issues involved in the debate over the benefits and costs of insider trading. Finally, we discuss evidence illustrating that legal market research can explain much of the runup in a target firm's stock price before a tender offer is formally announced.

Suggested Citation

  • Jeffry M. Netter & Annette B. Poulsen & Philip L. Hersch, 1988. "Insider Trading: The Law, The Theory, The Evidence," Contemporary Economic Policy, Western Economic Association International, vol. 6(3), pages 1-13, July.
    • Handle: RePEc:bla:coecpo:v:6:y:1988:i:3:p:1-13
    DOI: 10.1111/j.1465-7287.1988.tb00289.x
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    References listed on IDEAS

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    1. Seyhun, H. Nejat, 1986. "Insiders' profits, costs of trading, and market efficiency," Journal of Financial Economics, Elsevier, vol. 16(2), pages 189-212, June.
    2. Haddock, David D & Macey, Jonathan R, 1987. "Regulation on Demand: A Private Interest Model, with an Application to Insider Trading Regulation," Journal of Law and Economics, University of Chicago Press, vol. 30(2), pages 311-352, October.
    3. Jarrell, Gregg A & Brickley, James A & Netter, Jeffry M, 1988. "The Market for Corporate Control: The Empirical Evidence Since 1980," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 49-68, Winter.
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    Cited by:

    1. Fluck, Zsuzsanna, 1999. "The Dynamics of the Management-Shareholder Conflict," Review of Financial Studies, Society for Financial Studies, vol. 12(2), pages 379-404.
    2. Marie Dutordoir & Evangelos Vagenas‐Nanos & Patrick Verwijmeren & Betty Wu, 2021. "A rundown of merger target run‐ups," Financial Management, Financial Management Association International, vol. 50(2), pages 487-518, June.

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