The Equity and Efficiency of the Australian Share Market with Respect to Director Trading

Posted: 29 Jul 2009

See all articles by Katherine Uylangco

Katherine Uylangco

Queensland University of Technology - School of Economics and Finance

Stephen Andrew Easton

University of Newcastle

Robert W. Faff

University of Queensland

Date Written: July 29, 2009

Abstract

Thirteen percent of own-company trades by directors do not meet the ASX requirement of reporting within 5 business days, while seven percent are not reported within 14 business days as required by the Corporations Act. Such breaches of reporting regulations are particularly important given that directors tend to purchase (sell) shares when the price is low (high), thereby achieving abnormal returns. These abnormal returns are highest for purchases in resource companies. Ignoring transaction costs outsiders can achieve abnormal returns by imitating directors' trades. Directors avoid small but statistically significant losses in the period between selling shares and these trades being reported to the market.

Suggested Citation

Uylangco, Katherine and Easton, Stephen Andrew and Faff, Robert W., The Equity and Efficiency of the Australian Share Market with Respect to Director Trading (July 29, 2009). 22nd Australasian Finance and Banking Conference 2009. Available at SSRN: https://ssrn.com/abstract=1440507 or http://dx.doi.org/10.2139/ssrn.1440507

Katherine Uylangco (Contact Author)

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia

Stephen Andrew Easton

University of Newcastle ( email )

University Drive
Callaghan, nsw 2308
Australia

Robert W. Faff

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

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