Price Revelation from Insider Trading: Evidence from Hacked Earnings News

57 Pages Posted: 16 Apr 2019 Last revised: 28 Oct 2019

See all articles by Pat Akey

Pat Akey

University of Toronto - Rotman School of Management

Vincent Gregoire

HEC Montreal - Department of Finance

Charles Martineau

University of Toronto - Rotman School of Management and UTSC Management

Date Written: October 27, 2019

Abstract

From 2010--2015, a group of convicted traders accessed earnings information hours before their public release by hacking several major newswire services. We use their "insider" trading as a natural experiment to investigate how efficiently markets incorporate private information in prices. 15% of a firm’s earnings surprise was incorporated into its stock price prior to its public release when the hackers had access to non-public information. Volume and spread-based measures of informed trading detect this activity, but order flow-based measures do not. We find evidence that uninformed, professional traders traded in the same direction, amplifying the impact of informed trading.

Keywords: cyber risks, earnings announcements, insider trading, market price efficiency

JEL Classification: G10, G12, G14

Suggested Citation

Akey, Pat and Gregoire, Vincent and Martineau, Charles, Price Revelation from Insider Trading: Evidence from Hacked Earnings News (October 27, 2019). Available at SSRN: https://ssrn.com/abstract=3365024 or http://dx.doi.org/10.2139/ssrn.3365024

Pat Akey (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Vincent Gregoire

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

Charles Martineau

University of Toronto - Rotman School of Management and UTSC Management ( email )

105 St-George
Toronto, Ontario M5S3E6
Canada

HOME PAGE: http://charlesmartineau.com

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