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

Sylvain Friederich, Alan Gregory, John Matatko and Ian Tonks
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Sylvain Friederich: Financial Markets Group - London School of Economics and TEAM - Université Paris 1
Alan Gregory: School of Business and Management - University of Exeter
John Matatko: School of Business and Management - University of Exeter

Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)

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 (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Pages: 42 pages
Date: 1999-09
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https://shs.hal.science/halshs-03620363 (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)
Working Paper: Stock Price Patterns around the Trades of Corporate Insiders on the London Stock Exchange (1999)
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