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Insider Trading, Traded Volume and Returns

Author

Listed:
  • Fabio C. Bagliano

    () (Department of Economics and Public Finance "G. Prato", University of Torino)

  • Carlo A. Favero

    () (Innocenzo Gasparini Institute for Economic Research, Bocconi University)

  • Giovanna Nicodano

    () (Department of Economics and Public Finance "G. Prato", University of Torino)

Abstract

Several models predict that both market liquidity and trading volume generated by less informed traders do not increase when there is insider trading. Available empirical evidence is mixed and still relatively small, because of the inherent di¢ culty to identify insider trading events. Our econometric work, based on 19 suspect insider trading events drawn from the non-public ?file of the Italian supervisory authority, provides further insight on these key implications of stock market models. The second purpose of this paper is to assess whether insider trading changes the distribution of volume and returns in a way that can be used by supervisory authorities in order to detect its presence through statistical methods.

Suggested Citation

  • Fabio C. Bagliano & Carlo A. Favero & Giovanna Nicodano, 2011. "Insider Trading, Traded Volume and Returns," Working papers 26, Former Department of Economics and Public Finance "G. Prato", University of Torino.
  • Handle: RePEc:tur:wpaper:26
    as

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    File URL: http://www.biblioecon.unito.it/biblioservizi/RePEc/tur/wpaper/n26.pdf
    File Function: First version, 2011
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    References listed on IDEAS

    as
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    4. Sudipto Bhattacharya, 2001. "Insider Trading, Investment, and Liquidity: A Welfare Analysis," Journal of Finance, American Finance Association, vol. 56(3), pages 1141-1156, June.
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    12. Bhattacharya, Utpal & Daouk, Hazem & Jorgenson, Brian & Kehr, Carl-Heinrich, 2000. "When an event is not an event: the curious case of an emerging market," Journal of Financial Economics, Elsevier, vol. 55(1), pages 69-101, January.
    13. Andrea M. Buffa & Giovanna Nicodano, 2008. "Should Insider Trading be Prohibited when Share Repurchases are Allowed?," Review of Finance, European Finance Association, vol. 12(4), pages 735-765.
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    Citations

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    Cited by:

    1. Giovanni Cespa, 2007. "Information Sales and Insider Trading with Long-lived Information," CSEF Working Papers 174, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    2. Nadia Linciano, 2003. "The Effectiveness of Insider Trading Regulation in Italy. Evidence from Stock-Price Run-Ups Around Announcements of Corporate Control Transactions," European Journal of Law and Economics, Springer, vol. 16(2), pages 199-218, September.
    3. Giovanni Cespa, 2007. "Information Sales and Insider Trading with Long-lived Information," Working Papers 613, Queen Mary University of London, School of Economics and Finance.

    More about this item

    Keywords

    asymmetric information; insider trading; abnormal returns; traded volume;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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