Does Insider Trading Raise Market Volatility?

Julan Du and Shang-Jin Wei

Economic Journal, 2004, vol. 114, issue 498, 916-942

Abstract: This paper studies the role of insider trading in explaining cross-country differences in stock market volatility. It introduces a new measure of insider trading. The central finding is that countries with more prevalent insider trading have more volatile stock markets, even after one controls for liquidity/maturity of the market, and the volatility of the underlying fundamentals (volatility of real output and of monetary and fiscal policies). Moreover, the effect of insider trading is quantitatively significant when compared with the effect of economic fundamentals. Copyright 2004 Royal Economic Society.

Date: 2004
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Related works:
Working Paper: Does Insider Trading Raise Market Volatility? (2003)
Working Paper: Does Insider Trading Raise Market Volatility? (2003)
Working Paper: Does Insider Trading Raise Market Volatility? (2002)
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