Stock Price Around the Trades of Corporate Insider on the London Stock Exchange

John Matatko, Alan Gregory, Ian Tonks and Sylvain Friederich ()

FMG Discussion Papers from Financial Markets Group

Abstract: This paper examines the patterns of security returns around trades by corporate insiders in the shares of their own company. We find patterns in abnormal returns in the days around a directors trade that are consistent with directors engaging in short-term market timing: they sell (buy) after an increase (decline) in prices, and their trades are followed by a partial price reversal. This provides strong evidence that directors trade to exploit patterns in share prices. We also find positive gross, but not net, abnormal returns to imitating some of the trades of directors once transactions costs implicit in the bid ask spread are taken into account. We also report that some types of trades have superior predictive content for future returns. An important difference with previous work on this topic is that we find that medium-sized trades are more informative for short-term returns than large ones, consistent with Barclay and Warners (1993) ¶stealth trading¶ hypothesis.

Date: 1999-08
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmg_pdfs/dp332.pdf (application/pdf)

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:fmg:fmgdps:dp332

Access Statistics for this paper

More papers in FMG Discussion Papers from Financial Markets Group
Bibliographic data for series maintained by The FMG Administration ().