The Equity and Efficiency of the Australian Share Market with Respect to Director Trading
Posted: 29 Jul 2009
Date Written: July 29, 2009
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: Suggested Citation