(114) See Matt Levine, Why Not Insider Trade
on Every Company?, BLOOMBERG VIEW (Aug.
Second, abnormal returns, [AR.sub.jt], are calculated on a company-per-company basis for each day t, with t ranging from day zero, the day of the insider trade
, today 20.
The background trading on the stocks in the insider trade
data are taken from the Institute for the Study of Security Markets (ISSM) transaction database for the period January 1988-December 1992 and the Trade and Quote (TAQ) transaction database for the period January 1993-December 2002.
The latter is an enormous concern because governmental decisions affect entire markets, whereas effects from a single government insider trade
We identified an initial sample of firms included in the COMPUSTAT Quarterly File and the CRSP Dally Returns File where the Invest/Net database indicated at least one open market purchase or sale of common stock by an officer, director, or beneficial owner of more than ten percent of the firm's stock between January 1, 1984 and December 31, 1989.(4) For these firms and time period, we retained all quarterly earnings announcements where both COMPUSTAT provided an announcement date and the firm bad at least one insider trade
during the period 51 days before to 50 days after the announcement date.
Illicit insider trading occurs when a company insider trades
after gaining meaningful non-public information about the company, or if an insider buys or sells shares of stock without disclosing the trades via Securities and Exchange Commission filings.
public revelation of the information on which the insider trades
[section] 78j(b) (2012), to which Justice Ginsburg remarked "So what's the difference, if the insider trades
Second, whether an insider trades
on material or valuable but sub-material information, a Section 16(a) report alerts public investors within two days of the trade to the possibility that the insider has private information indicating that the stock is mispriced.
The authors find that more than half of total insider trades
are "routine" and therefore not informative about the associated firm's future prospects.
Moreover, in view of the fact that "a corporate insider trades
on information that is essentially undiscoverable--such as his intuition, based on all of the information available to him" the probability of being caught, if the insider is careful is "virtually zero." (373) Manne claims that for this reason "the SEC does not win many of the cases they bring, and they don't bring many." (374)
The purpose of this paper is to examine the information content of reported corporate insider trades
during the stock market crash of 2000-2002 and subsequent recovery in 2003.