Does Insider Trading Raise Market Volatility?

Julan Du and Shang-Jin Wei

No 9541, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies the role of insider trading in explaining cross-country differences in stock market volatility. It introduces a new measure of insider trading. The central finding is that countries with more prevalent insider trading have more volatile stock markets, even after one controls for liquidity/maturity of the market, and the volatility of the underlying fundamentals (volatility of real output and of monetary and fiscal policies). Moreover, the effect of insider trading is quantitatively significant when compared with the effect of economic fundamentals.

JEL-codes: I2 (search for similar items in EconPapers)
Date: 2003-03
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-rmg
Note: IFM AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published as Du, Julan and Shang-Jin Wei. "Does Insider Trading Raise Market Volatility?," Economic Journal, 2004, v114(498,Oct), 916-942.

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Journal Article: Does Insider Trading Raise Market Volatility? (2004)
Working Paper: Does Insider Trading Raise Market Volatility? (2003)
Working Paper: Does Insider Trading Raise Market Volatility? (2002)
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