Strategic Illegal Insider Trading Prior to Price Sensitive Announcements

Journal of Financial Crime, 2011, 18(3), 247-253

7 Pages Posted: 14 Apr 2013 Last revised: 14 Aug 2013

See all articles by Thomas H. McInish

Thomas H. McInish

University of Memphis - Fogelman College of Business and Economics

Alex Frino

The University of Sydney - Discipline of Finance; Financial Research Network (FIRN)

Frank Sensenbrenner

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS)

Date Written: April 13, 2011

Abstract

It is found that insiders are more likely to trade on high volume days, which indicates an effort to hide their trades. Further, insider trading raises the number of days with abnormally high trading volume only slightly, again indicating that insiders are avoiding attracting attention. No evidence is found that insider trading intensity increases on the insider trading day closest to the announcement day. The hypothesis that index returns for insider trading days and non-trading days are the same cannot be rejected, which is consistent with insiders avoiding detection. For stocks sold by insiders, returns are higher for insider trading days than for non-insider trading days. Hence, insiders are selling on days when the market is up, which tends to hide their trading. But for stocks bought by insiders, returns are significantly higher on insider trading days than on non-insider-trading days, indicating that in this case insiders may attract unwanted attention.

Keywords: Insider trading, Stock markets, Financial information

JEL Classification: G12

Suggested Citation

McInish, Thomas H. and Frino, Alex and Sensenbrenner, Frank, Strategic Illegal Insider Trading Prior to Price Sensitive Announcements (April 13, 2011). Journal of Financial Crime, 2011, 18(3), 247-253. Available at SSRN: https://ssrn.com/abstract=2250469

Thomas H. McInish

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States
901-678-4662 (Phone)
901-678-3006 (Fax)

Alex Frino

The University of Sydney - Discipline of Finance ( email )

Futures Research Centre
P.O. Box H58
Sydney NSW
Australia
+61 2 9299 1809 (Phone)
+61 2 9299 1830 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Frank Sensenbrenner (Contact Author)

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS) ( email )

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