The Value of Information: Inferences from the Profitability of Insider Trading

The Information Content of Directors' Trades: Empirical Analysis of the Australian Market

“…Specifically, Elliot, Morse and Richardson (1984) study abnormal returns generated before and after the public disclosure of information concerning dividends, earnings, bond ratings, mergers, and bankruptcies. In the USA, insider purchases have been more profitable than sales (Baesel and Stein, 1979;Nun et al 1983;Seyhun, 1998;Lakonishok and Lee, 2001) and there is a positive trading volume/leverage impact on profitability (Seyhun, shall (2002), who find that an increase in the volume of insider purchases was associated with an increase in abnormal returns, but this was not the case for insider sales. Lakonishok and Lee (2001) argue that this is because insiders have many reasons to sell, which include liquidity, rebalancing and diversification, and these are not always undertaken based on pricesensitive inside information.…”

An investigation of insider trading profits in the Spanish stock market

“…In addition to U.S. markets, studies on insider trading have been performed for the Canadian and Mexican stock markets (Baesel andStein, 1989 andBhattacharya et al 2000, respectively) and, in Europe, only for the Oslo Stock Exchange (Eckbo and Smith, 1998) and the London Stock Exchange (Pope et al, 1990). Our research uses Spanish stock market data for the first time to examine the debate on the profitability and information content of insider trading and its benefits and drawbacks.…”

An unreliable canary: Insider trading, the cash flow hypothesis and the financial crisis

“…In particular, insider trading in the banking sector has been shown to be successful both within the US and Canada (Madura & Wiant, 1995;Lee & Bishara, 1989). These studies show that individuals earn greater returns on their personal portfolio transactions than their counterparts from other areas of business (Baesel & Stein, 1979). A higher degree of informational asymmetry also exists between insiders and uninformed traders in smaller banks where the outside focus from analysts and investors is less intense (Madura & Wiant, 1995).…”