English, Article, Journal or magazine article edition: The Dog That Did Not Bark: Insider Trading and Crashes José M. Marín; Jacques Olivier

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Bookmark: http://trove.nla.gov.au/version/153220
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • The Dog That Did Not Bark: Insider Trading and Crashes
Author
  • José M. Marín
  • Jacques Olivier
Physical Description
  • preprint
Notes
  • This paper documents that at the individual stock level insiders sales peak many months before a large drop in the stock price, while insiders purchases peak only the month before a large jump. We provide a theoretical explanation for this phenomenon based on trading constraints and asymmetric information. A key feature of our theory is that rational uninformed investors may react more strongly to the absence of insider sales than to their presence (the “dog that did not bark” effect). We test our hypothesis against competing stories such as patterns of insider trading driven by earnings announcement dates, or insiders timing their trades to evade prosecution.
  • insider trading; rational expectations equilibrium; trading constraints; volatility; crashes; short- sales constraint
  • RePEc:imd:wpaper:wp2007-20
  • This paper documents that at the individual stock level insiders sales peak many months before a large drop in the stock price, while insiders purchases peak only the month before a large jump. We provide a theoretical explanation for this phenomenon based on trading constraints and asymmetric information. We test our hypothesis against competing stories such as patterns of insider trading driven by earnings announcement dates, or insiders timing their trades to evade prosecution. Finally we provide new evidence regarding crashes and the degree of information asymmetry.
  • RePEc:upf:upfgen:948
Language
  • English
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