Does Insider Trading Really Move Stock Prices?

Posted: 26 Mar 1999


Prior studies have reported a positive correlation between insider trading and stock price changes. The implication of these studies is that insider (i.e., informed) trades have a differential impact on price discovery than non-insider (i.e., uninformed) trades. Based on these results, various scholars have argued for the legalization of insider trading to facilitate rapid price discovery. We analyze the trading activity of a confessed inside trader, Ivan Boesky, in Carnation's stock just prior to the acquisition of Carnation by Nestle, and find that our tests are unable to distinguish the price effect of Boesky's (i.e., informed) purchases of Carnation's stock from the effect of non-insider (i.e., uninformed) purchases. Our conclusion survives extensive robustness tests and has methodological and public policy implications.

JEL Classification: G12, G14

Suggested Citation

Chakravarty, Sugato and McConnell, John J., Does Insider Trading Really Move Stock Prices?. Journal of Financial and Quantitative Analysis. Available at SSRN:

Sugato Chakravarty (Contact Author)

Purdue University ( email )

Consumer Sciences
1262 Matthews Hall Rm 214F
West Lafayette, IN 47906
United States
765-494-6427 (Phone)
765-494-0869 (Fax)


John J. McConnell

Purdue University ( email )

403 West State St.
West Lafayette, IN 47907-2056
United States
765-494-5910 (Phone)
765-494-7863 (Fax)

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics