Stealth Trading by Corporate Insiders

58 Pages Posted: 21 Nov 2009

See all articles by Olga Klein

Olga Klein

University of Warwick - Warwick Business School

Ernst G. Maug

University of Mannheim Business School; European Corporate Governance Institute (ECGI)

Christoph Schneider

Universität Münster

Date Written: November 19, 2009


This paper analyzes stealth trading by corporate insiders in US equity markets. Stealth trading is the practice to break up trades into sequences of smaller trades. We find that stealth trading is pervasive and distinguish two explanations. The first argues that insiders break up trades in order to conceal private information about the fundamental value of the stock, whereas the second holds that insiders act like discretionary liquidity traders who want to reduce the tem-porary price impact from trading large stakes. We find some, but inconsistent evidence for information-based explanations, but strong and unambiguous evidence for liquidity-based ex-planations. These conclusions hold across subsamples for transactions before and after the Sarbanes-Oxley act and for NASDAQ as well as NYSE stocks.

Keywords: Stealth Trading, Insider Trading, Sarbanes-Oxley

JEL Classification: G14, G34, G38

Suggested Citation

Klein, Olga and Maug, Ernst G. and Schneider, Christoph, Stealth Trading by Corporate Insiders (November 19, 2009). WBS Finance Group Research Paper No. 132, Available at SSRN: or

Olga Klein

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Ernst G. Maug (Contact Author)

University of Mannheim Business School ( email )

L9, 1-2
Mannheim, 68131
+49 621 181-1952 (Phone)


European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Christoph Schneider

Universität Münster ( email )

Universitätsstraße 14-16
Münster, 48143
+492518322088 (Phone)

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