Public Disclosure and Dissimulation of Insider Trades

28 Pages Posted: 30 Jul 2000

See all articles by Steven J. Huddart

Steven J. Huddart

Pennsylvania State University, University Park - Department of Accounting

John S. Hughes

University of California at Los Angeles

Carolyn B. Levine

Carnegie Mellon University - David A. Tepper School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: May 2000

Abstract

Regulation requiring insiders to publicly disclose their stock trades after the fact complicates the trading decisions of informed, rent-seeking insiders. Given this requirement, we present an insider's equilibrium trading strategy in a multiperiod rational expectations framework. Relative to Kyle (1985), price discovery is accelerated and insider profits are lower. The strategy balances immediate profits from informed trades against the reduction in future profits following trade disclosure and, hence, revelation of some of the insider's information. Our results offer a novel rationale for contrarian trading: dissimulation, a phenomenom distinct from manipulation, may underlie insiders' trading decisions.

Keywords: Insider trading, price discovery, liquidity, securities regulation

JEL Classification: G28, K22, M41

Suggested Citation

Huddart, Steven J. and Hughes, John S. and Levine, Carolyn B., Public Disclosure and Dissimulation of Insider Trades (May 2000). Available at SSRN: https://ssrn.com/abstract=235394 or http://dx.doi.org/10.2139/ssrn.235394

Steven J. Huddart (Contact Author)

Pennsylvania State University, University Park - Department of Accounting ( email )

University Park, PA 16802-3603
United States
814-863-0448 (Phone)

HOME PAGE: http://directory.smeal.psu.edu/sjh11

John S. Hughes

University of California at Los Angeles ( email )

D410 Anderson Complex
Los Angeles, CA 90095-1481
United States
310-794-9553 (Phone)
310-267-2193 (Fax)

Carolyn B. Levine

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
796
Abstract Views
13,729
rank
33,222
PlumX Metrics