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Firms vs. Insiders as Traders of Last Resort

37 Pages Posted: 19 Nov 2006  

Jose M. Marin

Universidad Carlos III de Madrid

Antoni Sureda-Gomila

La Caixa

Date Written: 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.

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

JEL Classification: G11, G12, G14, G18

Suggested Citation

Marin, Jose M. and Sureda-Gomila, Antoni, Firms vs. Insiders as Traders of Last Resort (November 15, 2006). Available at SSRN: or

Jose Marin (Contact Author)

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903


Antoni Sureda-Gomila

La Caixa ( email )

Av Diagonal 629
Barcelona, 08028

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