Insider Trading in Hong Kong: Tests of Stock Returns and Trading Frequency

Michael Firth (), T. Y. Leung () and Oliver Rui
Additional contact information
Michael Firth: Department of Finance and Insurance, Lingnan University of Hong Kong, Hong Kong
T. Y. Leung: Department of Accountancy, City University of Hong Kong, Kowloon Tong, Hong Kong

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2011, vol. 14, issue 03, 505-533

Abstract: The main purpose of this paper is to examine the legal insider trading activities by directors of companies listed on the Hong Kong Exchange over the period 1993 to 1999. One characteristic of insider trading in Hong Kong is the high frequency of transactions and the large amounts of money involved. Inside purchases appear to signal and correct undervaluation and inside sales appear to signal and correct overvaluation. In contrast to research from Britain and the United States, insider sales are more informative than purchases. On average, insiders earn HK$91,297 per trade, while outsiders who mimic insiders' transactions earn minimal returns. Many firms suffer from infrequent trading and our results are consistent with directors engaging in inside transactions so as to help create a market for the shares. In additional tests, we find that the frequency of insider trading is a function of information asymmetry.

Keywords: Insider trading; stock returns; trading frequency (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219091511002317
Access to full text is restricted to subscribers

Related works:
Working Paper: Insider Trading in Hong Kong: Tests of Stock Returns and Trading Frequency (2009)
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:wsi:rpbfmp:v:14:y:2011:i:03:n:s0219091511002317

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219091511002317

Access Statistics for this article

Review of Pacific Basin Financial Markets and Policies (RPBFMP) is currently edited by Cheng-few Lee

More articles in Review of Pacific Basin Financial Markets and Policies (RPBFMP) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().