Stock Price Patterns around the Trades of Corporate Insiders on the London Stock Exchange

Sylvain Friederich (), Alan Gregory, John Matatko and Ian Tonks
Additional contact information
Sylvain Friederich: Financial Market Group R 410 - LSE - London School of Economics and Political Science, TEAM - Théories et Applications en Microéconomie et Macroéconomie - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Alan Gregory: University of Exeter Business School - University of Exeter
John Matatko: University of Exeter Business School - University of Exeter

Post-Print from HAL

Abstract: This paper examines the patterns of security returns around the trades of corporate insiders in the shares of their own company. We find patterns in abnormal returns in the days around a director's 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 over future returns. In particular, we find that medium-sized trades are more informative for short-term returns than large ones, consistent with Barclay and Warner's (1993) "stealth trading" hypothesis.

Keywords: market efficiency; corporate insiders; insider trading; Directors' trading; informed trading; transactions d'initiés; transactions d'agents informés; tests d'efficience des marchés (search for similar items in EconPapers)
Date: 1999-09
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03620363v1
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in 1999

Downloads: (external link)
https://shs.hal.science/halshs-03620363v1/document (application/pdf)

Related works:
Working Paper: Stock Price Patterns around the Trades of Corporate Insiders on the London Stock Exchange (1999)
Working Paper: Stock Price Patterns around the Trades of Corporate Insiders on the London Stock Exchange (1999)
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:hal:journl:halshs-03620363

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().