Retail Insider Trading and Market Price Efficiency: Evidence from Hacked Earnings News
46 Pages Posted: 16 Apr 2019
Date Written: April 3, 2019
Over six years, a group of convicted traders accessed upcoming earnings press releases hours before the official announcement through a series of cyber intrusions into the main newswire services. This setting allows us to investigate how efficient are markets at learning about insider's private information and which stocks are more susceptible to insider trading. Pre-announcement stock returns of firms exposed to hacks predict earnings surprises. Also, the after-hours return responsiveness to surprises decreases by 20%. The effects is predominantly found in medium-sized firms, on days with a high number of earnings announcements, and for large surprises.
Keywords: cyber risks, earnings announcements, insider trading, market price efficiency
JEL Classification: G10, G12, G14
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