An unreliable canary: Insider trading, the cash flow hypothesis and the financial crisis

Brendan J. Lambe

International Review of Financial Analysis, 2016, vol. 46, issue C, 151-158

Abstract: This paper investigates whether measures of aggregated insider trading could have predicted the wider economic change that occurred in the UK around the time of the financial crisis. Seyhun's (1988, 1992) cash flow hypothesis is the underpinning rationale driving the investigation. Within a vector auto-regressive framework, this study disentangles the relationship between returns and the activities of insiders in UK listed firms in order to validate Seyhun's assertions in this context. Findings suggest that, unlike the US, the relationship is not present. Instead, aggregate measures of trading decisions show that insiders are more likely driven by public perception than by private information.

Keywords: Insider trading; Cash flow hypothesis (search for similar items in EconPapers)
JEL-codes: G10 G14 K20 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:46:y:2016:i:c:p:151-158

DOI: 10.1016/j.irfa.2016.05.005

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