Chasing Private Information

61 Pages Posted: 24 Nov 2015 Last revised: 20 Apr 2018

Marcin T. Kacperczyk

Imperial College London - Accounting, Finance, and Macroeconomics; National Bureau of Economic Research (NBER)

Emiliano Pagnotta

Imperial College Business School

Multiple version iconThere are 2 versions of this paper

Date Written: April 10, 2018


Using over 5000 equity and option trades unequivocally based on nonpublic information about firm fundamentals, we find that widely used adverse selection signals display abnormal values on days with informed trading. Volatility and volume values are abnormally high, whereas illiquidity values are low, both in equity and options markets. Signals are more sensitive to informed trading in options markets and before unscheduled corporate announcements. We characterize cross-sectional responses based on the sign, type, and duration of private information. Evidence from the U.S. Securities and Exchange Commission (SEC) Whistleblower Reward Program addresses potential selection concerns.

Keywords: Private information, information signals, adverse selection proxies, insider trading, trading strategies, liquidity, asset prices, abnormal volume, stock markets, option markets, volatility, SEC

JEL Classification: G12, G14, G10

Suggested Citation

Kacperczyk, Marcin T. and Pagnotta, Emiliano, Chasing Private Information (April 10, 2018). Available at SSRN: or

Marcin T. Kacperczyk (Contact Author)

Imperial College London - Accounting, Finance, and Macroeconomics ( email )

South Kensington campus
London SW7 2AZ
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Emiliano Pagnotta

Imperial College Business School ( email )

Imperial College Business School, Tanaka Building
London, SW7 2AZ
Great Britain
+447478734028 (Phone)

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