Impact of the Galleon Case On Informed Trading Before Merger Announcements
41 Pages Posted: 14 Jun 2013
Date Written: December 5, 2012
On October 16, 2009, the U.S. government charged Galleon hedge fund founder Raj Rajaratnam and five others with insider trading, in what was described by a key prosecutor overseeing the case as a "wake-up call to Wall Street and to every hedge fund manager." We find that the mean abnormal stock price runup of targets (a measure of informed trading) during the 26 months since the inception of the Galleon case declined from 5.12% to 2.84%. The early evidence strongly suggests that the Galleon case has sent a clear signal to the traders, and that the traders are listening.
Keywords: Insider Trading, Galleon, Mergers
JEL Classification: G34
Suggested Citation: Suggested Citation