Short‐run Returns around the Trades of Corporate Insiders on the London Stock Exchange

Sylvain Friederich, Alan Gregory, John Matatko and Ian Tonks

European Financial Management, 2002, vol. 8, issue 1, 7-30

Abstract: Previous work examined the long‐run profitability of strategies mimicking the trades company directors in the shares of their own company, as a way of testing for market efficiency. The current paper examines patterns in abnormal returns in the days around these trades on the London Stock Exchange. We find movements in returns that are consistent with directors engaging in short‐term market timing. We also report that some types of trades have superior predictive content over future returns. In particular, medium‐sized trades are more informative for short‐term returns than large ones, consistent with Barclay and Warner’s (1993) ‘stealth trading’ hypothesis whereby informed traders avoid trading in blocks. Another contribution of this study is to properly adjust the abnormal return estimates for microstructure (spread) transactions costs using daily bid‐ask spread data. On a net basis, we find that abnormal returns all but disappear.

Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (68)

Downloads: (external link)
https://doi.org/10.1111/1468-036X.00174

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:eufman:v:8:y:2002:i:1:p:7-30

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1354-7798

Access Statistics for this article

European Financial Management is currently edited by John Doukas

More articles in European Financial Management from European Financial Management Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().