Time‐Varying Liquidity Trading, Private Information and Insider Trading

31 Pages Posted: 15 Mar 2014

See all articles by Qin Lei

Qin Lei

University of Michigan at Ann Arbor

Xuewu Wesley Wang

Quinnipiac University

Multiple version iconThere are 2 versions of this paper

Date Written: March 2014

Abstract

This paper investigates the insider trading before scheduled versus unscheduled corporate announcements to explore how corporate insiders utilise their private information in response to the time‐varying liquidity trading. Using a comprehensive insider trading database, we show that: (1) the insider's propensity to trade increases in the amount of liquidity trading before both the scheduled and unscheduled announcements; (2) insiders buy (sell) more before positive (negative) announcements; and (3) insider purchases are more profitable before unscheduled announcements than before scheduled ones. They suggest that insiders time their trades around scheduled and unscheduled announcements to exploit the varying extent of liquidity trading.

Keywords: time varying, liquidity trading, insider trading

Suggested Citation

Lei, Qin and Wang, Xuewu Wesley, Time‐Varying Liquidity Trading, Private Information and Insider Trading (March 2014). European Financial Management, Vol. 20, Issue 2, pp. 321-351, 2014. Available at SSRN: https://ssrn.com/abstract=2409356 or http://dx.doi.org/10.1111/j.1468-036X.2011.00634.x

Qin Lei (Contact Author)

University of Michigan at Ann Arbor ( email )

Ross School of Business
701 Tappan Street
Ann Arbor, MI 48109-1234
United States

HOME PAGE: http://leiq.bus.umich.edu

Xuewu Wesley Wang

Quinnipiac University ( email )

275 Mt Carmel Ave
Hamden, CT 06518
United States
6179353977 (Phone)

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