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Firms vs. Insiders as Traders of Last Resort

Jose M. Marin

Universidad Carlos III de Madrid

Antoni Sureda-Gomila

La Caixa

November 15, 2006

We explore the role of corporate insiders vs. firms as traders of last resort. We develop a simple model of insider trading in which insiders provide price support, as well as liquidity, in security markets. Consistent with the model predictions we find that in the US markets insiders' trading activities have a clear impact on return distributions. Furthermore, we provide empirical evidence on insiders transactions and firm transactions affecting returns in a different manner. In particular, while insiders' transactions (both purchases and sales) have a strong impact on skewness in the short run and to a lesser extent in short run volatility, company repurchases only have a clear impact on volatility, both in the short and the long run. We provide explanations for this asymmetry.

Number of Pages in PDF File: 37

Keywords: Insider trading, liquidity, short-horizon variance, skewness

JEL Classification: G11, G12, G14, G18

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Date posted: November 19, 2006  

Suggested Citation

Marin, Jose M. and Sureda-Gomila, Antoni, Firms vs. Insiders as Traders of Last Resort (November 15, 2006). Available at SSRN: https://ssrn.com/abstract=945193 or http://dx.doi.org/10.2139/ssrn.945193

Contact Information

Jose M. Marin (Contact Author)
Universidad Carlos III de Madrid ( email )
CL. de Madrid 126
Madrid, Madrid 28903
HOME PAGE: http://www.josemarin.com
Antoni Sureda-Gomila
La Caixa ( email )
Av Diagonal 629
Barcelona, 08028
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