Information Asymmetry and Cross-Sectional Determinants of Insider Trading

60 Pages Posted: 27 Jun 2006

See all articles by Steven J. Huddart

Steven J. Huddart

Pennsylvania State University, University Park - Department of Accounting

Bin Ke

National University of Singapore

Multiple version iconThere are 2 versions of this paper

Abstract

We investigate the relationship of candidate information asymmetry measures to aspects of insiders' trades. For two of the measures, the median absolute abnormal return over past earnings announcements (MAG_AR) and whether the firm reports R&D expenditures, associations are consistent with the predictions of a price-taking theory of informed trade. Also, insiders' profits are significantly higher when MAG_AR is greater. For the other measures we consider, associations are inconsistent with the predicted relationships, suggesting that either those measures are poor proxies for information asymmetry or models of informed trade are not descriptive.

Keywords: Accounting, Disclosure, Securities, Regulation

JEL Classification: G15, M41, M45, K22, D82

Suggested Citation

Huddart, Steven J. and Ke, Bin, Information Asymmetry and Cross-Sectional Determinants of Insider Trading. Contemporary Accounting Research, Vol. 24, No. 1, Spring 2007. Available at SSRN: https://ssrn.com/abstract=911542 or http://dx.doi.org/10.2139/ssrn.426720

Steven J. Huddart (Contact Author)

Pennsylvania State University, University Park - Department of Accounting ( email )

University Park, PA 16802-3603
United States
814-863-0448 (Phone)

HOME PAGE: http://directory.smeal.psu.edu/sjh11

Bin Ke

National University of Singapore ( email )

Mochtar Riady Building, BIZ 1, #07-54
15 Kent Ridge Drive
Singapore, 119245
Singapore
+6566013133 (Phone)

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