Trading Strategies of Corporate Insiders

68 Pages Posted: 27 Jul 2012 Last revised: 20 Jul 2017

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

Tilburg University - Department of Finance

Date Written: January 4, 2017

Abstract

We test two complementary theories of optimal trading strategies by analyzing transaction pat-terns of corporate insiders: Information-based theories predict that investors trade faster if they compete with others for exploiting the same information. Liquidity-based theories predict the opposite. Our analysis supports the predictions of liquidity-based models: insiders take longer to complete trades when they face competition from other insiders and they trade slower in less liquid markets. Insiders adapt to fluctuations in market liquidity. We identify informed trading using CARs, company news announcements, and insider trading pattern. Our results support the predictions of information-based models for trades classified as informed.

Keywords: Trade splitting, informed trading, block trading, insider trading, liquidity, Sarbanes-Oxley

JEL Classification: G14, G34, G38

Suggested Citation

Klein, Olga and Maug, Ernst G. and Schneider, Christoph, Trading Strategies of Corporate Insiders (January 4, 2017). Journal of Financial Markets, Vol. 34, pp. 48-68, 2017. Available at SSRN: https://ssrn.com/abstract=2118110 or http://dx.doi.org/10.2139/ssrn.2118110

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
Germany
+49 621 181-1952 (Phone)

HOME PAGE: http://cf.bwl.uni-mannheim.de/de/people/maug/

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Christoph Schneider

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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