Insider Trading and Macroeconomic Risk

44 Pages Posted: 5 Jan 2021

Date Written: November 16, 2020


This Article suggests a link between insider trading regulation and macroeconomic risk. Current securities laws do not explicitly prohibit a company insider from trading in the stocks of her company’s suppliers, customers, competitors, and complementors (based on material, non-public information regarding her company). But such “network trades” can be highly profitable, and as a result, can encourage corporate risk-taking by company insiders. As insights from network theory reveal that such risk-taking incentives will be significantly greater among insiders in industries that have a larger impact on macroeconomic risk, the possibility of network trades increases macroeconomic risk.

Keywords: insider trading; macroeconomic risk; network theory; systematically important financial institutions; risk-taking; network trades; shadow trades; aggregate fluctuations

JEL Classification: D85, E02, E32, K2, K22, L14

Suggested Citation

Lee, Yoon-Ho Alex and Romano, Alessandro, Insider Trading and Macroeconomic Risk (November 16, 2020). Available at SSRN: or

Yoon-Ho Alex Lee

Northwestern Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States
(312) 503-2565 (Phone)

Alessandro Romano (Contact Author)

Bocconi University - Department of Law ( email )

Via Roentgen, 1
Milan, Milan 20136

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