The Dollar Profits to Insider Trading*

Information networks: evidence from illegal insider trading tips

Peter Cziraki and Jasmin Gider

Review of Finance, 2021, vol. 25, issue 5, 1547-1580

Abstract: This article studies insider trading quantities and dollar profits to measure the benefits insiders extract from their superior information. Dollar profits are economically small for a typical insider, the median insider earning $464 per year. The correlation between dollar profits and percentage returns is moderate, because returns are negatively correlated with trade size and frequency. We show that these correlations vary with proxies for insider preferences, firm-level monitoring, and regulatory scrutiny. As a consequence, variables that predict percentage returns fail to predict dollar profits, and past dollar profits are negatively related to future returns. Our work suggests that dollar profits are a better measure for corporate governance applications of insider trading.

Keywords: Insider trading; Trading profits; Corporate governance; Executive compensation (search for similar items in EconPapers)
JEL-codes: G14 G34 M52 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://hdl.handle.net/10.1093/rof/rfab010 (application/pdf)
Access to full text is restricted to subscribers.

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:oup:revfin:v:25:y:2021:i:5:p:1547-1580.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Review of Finance is currently edited by Marcin Kacperczyk

More articles in Review of Finance from European Finance Association Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().