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The nonlinear connection between 52-week high and announcement effect of insider trading — Evidence from mainland China and Taiwan

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  • Chu, Chien Chi
  • Chang, Chiao Yi
  • Zhou, Rui Jie

Abstract

Employing two regulatory experiments including the pre-disclosure of insider sales in the Taiwan and the post-disclosure in China, this study investigates the different thinking of investors and effects in the stock markets. Using threshold model, we find that the investors may be reluctant to sell their holding for those priced stocks related to 52-week high under pre-disclosure of insider sales, because they cannot make sure when the insiders to sell actually. Oppositely, investors hurry to sell priced stocks near 52-week high under post-disclosure of insider sales owing to the certainty of insider sales. This paper confirms the anchoring effect of 52-week high for the event of insider trading.

Suggested Citation

  • Chu, Chien Chi & Chang, Chiao Yi & Zhou, Rui Jie, 2021. "The nonlinear connection between 52-week high and announcement effect of insider trading — Evidence from mainland China and Taiwan," Economic Modelling, Elsevier, vol. 94(C), pages 1043-1057.
    • Handle: RePEc:eee:ecmode:v:94:y:2021:i:c:p:1043-1057
    DOI: 10.1016/j.econmod.2020.02.044
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    More about this item

    Keywords

    Threshold model; Insider sales; 52-Week high; Event study;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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