Cookies?
Library Header Image
LSE Research Online LSE Library Services

Stock price patterns around the trades of corporate insiders on the London Stock Exchange

Friederich, Sylvain, Gregory, Alan, Matako, John and Tonks, Ian (1999) Stock price patterns around the trades of corporate insiders on the London Stock Exchange. Financial Markets Group Discussion Papers (332). Financial Markets Group, The London School of Economics and Political Science, London, UK.

[img] Text (dp332) - Published Version
Download (328kB)

Abstract

This paper examines the patterns of security returns around the trades of corporate insiders in the shares of their own company. We find patterns in abnormal returns in the days around a director's trade that are consistent with directors engaging in short- term market timing: they sell (buy) after an increase (decline) in prices, and their trades are followed by a partial price reversal. This provides strong evidence that directors trade to exploit patterns in share prices. We also find positive gross, but not net, abnormal returns to imitating some of the trades of directors once transactions costs implicit in the bid-ask spread are taken into account. We also report that some types of trades have superior predictive content over future returns. In particular, we find that medium-sized trades are more informative for short-term returns than large ones, consistent with Barclay and Warner's (1993) "stealth trading" hypothesis.

Item Type: Monograph (Discussion Paper)
Official URL: https://www.fmg.ac.uk/
Additional Information: © 1999 The Authors
Divisions: Finance
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
JEL classification: G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
Date Deposited: 04 Jul 2023 11:27
Last Modified: 16 Sep 2023 00:02
URI: http://eprints.lse.ac.uk/id/eprint/119116

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics