How Much Does an Illegal Insider Trade?

23 Pages Posted: 8 May 2013

See all articles by Alex Frino

Alex Frino

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

Stephen E. Satchell

University of Cambridge - Faculty of Economics and Politics

Brad Wong

The University of Sydney

Hui Zheng

Discipline of Finance, The University of Sydney; Capital Markets CRC Limited

Multiple version iconThere are 2 versions of this paper

Date Written: June 2013

Abstract

This paper examines the choice of trade size by an illegal insider. Previous literature (i.e. Meulbroek 1992) tends to focus on the price impact of such a trader. Using a unique data set hand‐collected from the litigation reports of the Securities and Exchange Commission and court cases, we provide evidence, which suggests that the size of an illegal insider's trade is a function of the value of his private information, the probability of detection and the expected penalty if detected. Our results have important implication for security market regulators.

Suggested Citation

Frino, Alex and Satchell, Stephen E. and Wong, Brad and Zheng, Hui, How Much Does an Illegal Insider Trade? (June 2013). International Review of Finance, Vol. 13, Issue 2, pp. 241-263, 2013. Available at SSRN: https://ssrn.com/abstract=2262149 or http://dx.doi.org/10.1111/irfi.12006

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

Stephen E. Satchell

University of Cambridge - Faculty of Economics and Politics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom
44 (0)1223 335213 (Phone)
44 (0)1223 335475 (Fax)

HOME PAGE: http://www.econ.cam.ac.uk/faculty/satchell/index.h

Brad Wong

The University of Sydney ( email )

University of Sydney
Sydney, NC NSW 2006
Australia

Hui Zheng

Discipline of Finance, The University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia
+61 2 9351 3915 (Phone)
+61 2 9351 6461 (Fax)

Capital Markets CRC Limited ( email )

GPO Box 970
55 Harrington Street
Sydney, NSW 2001
Australia

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