• The Impact of Insider Trading on Stock Price and Volume-Perspectives from Buyers and Sellers

Abstract

This study employs indicted insider trading cases, collects the relevant information and the event time of each case and divides the cases into three stages, i.e. the preceding, processing, and post-announcement periods. Moreover, we separate them into buying and selling insider trading according to private information and examine the effect of insider trading on price and volume respectively. The advantages of direct observation method are to improve the investigation effect of event study and to avoid the deviation in abnormal return measurement without considering the behavior factor of insider trading. The empirical results demonstrate the different reactions of the observed stocks on price and volume in different stages. Notably, the price of event stocks has changed in response to the private information during the processing stage, and the trading volume displayed an abnormal variation significantly. Finally, it is worthwhile for investors to note that selling trades will appear after insider trading.

Keywords: Insider Trading, Private Information, Event Study, Abnormal Return