The Empirical Literature on Insider Trading: An Overview
The contemporaneous development of rigorous theories of asset pricing and market efficiency in the mid-1960s led naturally to recognition of the need for a closer examination of the role of information generally and private information specifically in the workings of capital markets. The trickle of empirical research on insider trading in the early part of that decade has been supplanted by a steady stream of research addressing numerous issues, including the implications of asymmetric information, actions of insiders around various firm-related events, and the effects of regulation on the actions of those with private information. In this chapter, we focus on the extant empirical research on insider trading in finance. To facilitate an orderly examination of a large body of material, the following discussion is divided into four (nonmutually exclusive) sections:
The Nature and Characteristics of Insiders’ Transactions
Insider Trading and Information Efficiency
Insider Trading and Managerial Decisions
Insider Trading and the Efficacy of Regulation
KeywordsAbnormal Return Excess Return Earning Announcement Inside Trading Efficient Market Hypothesis
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© Springer Science+Business Media New York 1993