Insider trading and firm-specific return volatility

Partha Gangopadhyay (), Ken Yook () and Yoon Shin ()

Review of Quantitative Finance and Accounting, 2014, vol. 43, issue 1, 19 pages

Abstract: Roll (J Financ 43:541–566, 1988 ) argues that firm-specific stock return volatility may result either from informed trading or from noise trading that is unrelated to information. In this paper we provide evidence that insider purchases are inversely related to the idiosyncratic volatility of stocks. We also find that stock idiosyncratic volatilities are generally inversely related to future 6- and 12-month returns. Our results are primarily driven by the timing of insider sales rather than insider purchases. The results are consistent with an information-based explanation of firm-specific return volatility. Copyright Springer Science+Business Media New York 2014

Keywords: Insider trading; Idiosyncratic volatility; Two-stage least squares regression; Contrarian trading; Private information; G00; G14; G30 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s11156-013-0362-z

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