Does Insider Trading Impair Market Liquidity? Evidence from IPO Lockup Expirations

2003 ◽  
Author(s):  
Charles Quanwei Cao ◽  
Laura Casares Field ◽  
Gordon R. Hanka
Keyword(s):  
Insider Trading ◽  
Market Liquidity

scholarly journals Linear Bayesian equilibrium in insider trading with a random time under partial observations

2021 ◽  
Vol 6 (12) ◽  
pp. 13347-13357
Author(s):  
Kai Xiao ◽  
◽  
Yonghui Zhou ◽  
Keyword(s):  
Insider Trading ◽  
Partial Information ◽  
Market Liquidity ◽  
Random Time ◽  
Dynamic Programming Principle ◽  
Unimodal Function ◽  
Market Makers ◽  
Market Depth ◽  
Bayesian Equilibrium ◽  
Trading Model

<abstract><p>In this paper, the insider trading model of Xiao and Zhou (<italic>Acta Mathematicae Applicatae, 2021</italic>) is further studied, in which market makers receive partial information about a static risky asset and an insider stops trading at a random time. With the help of dynamic programming principle, we obtain a unique linear Bayesian equilibrium consisting of insider's trading intensity and market liquidity parameter, instead of none Bayesian equilibrium as before. It shows that (i) as time goes by, both trading intensity and market depth increase exponentially, while residual information decreases exponentially; (ii) with average trading time increasing, trading intensity decrease, but both residual information and insider's expected profit increase, while market depth is a unimodal function with a unique minimum with respect to average trading time; (iii) the less information observed by market makers, the weaker trading intensity and market depth are, but the more both expect profit and residual information are, which is in accord with our economic intuition.</p></abstract>

Market Liquidity: Does Insider Trading Matter?

2011 ◽  
Author(s):  
Christoph G. Rösch ◽  
Christoph Kaserer
Keyword(s):  
Insider Trading ◽  
Market Liquidity

Does Insider Trading Impair Market Liquidity? Evidence from IPO Lockup Expirations

2004 ◽  
Vol 39 (1) ◽  
pp. 25-46 ◽  
Author(s):  
Charles Cao ◽  
Laura Casares Field ◽  
Gordon Hanka
Keyword(s):  
Insider Trading ◽  
Trading Volume ◽  
Large Body ◽  
Market Liquidity ◽  
Share Price ◽  
Trading Activity ◽  
Liquidity Measures

AbstractWe test the hypothesis that insider trading impairs market liquidity by analyzing intraday trades and quotes around 1,497 IPO lockup expirations in the period 1995–1999. We find that, while lockup expirations are associated with considerable insider trading for some IPO firms, they have little effect on effective spreads. By contrast, two other liquidity measures, quote depth and trading activity, improve substantially. In the 23% of lockup expirations where insiders disclose share sales, spreads actually decline. These findings indicate that a large body of well-informed, blockholding insider traders can enter a market from which they had previously been absent, and substantially change trading volume and share price without impairing market liquidity.

A Case Study of Illegal Insider Trading — The Scandal of Vultures' Insider Trading

2011 ◽  
Vol 14 (01) ◽  
pp. 81-99 ◽  
Author(s):  
Yu Chuan Huang ◽  
Shu Hui Chan
Keyword(s):  
Insider Trading ◽  
Stock Price ◽  
Annual Report ◽  
Investment Decision ◽  
Market Liquidity ◽  
Insider Information ◽  
Empirical Results ◽  
Window Dressing ◽  
Negative News

The purpose of this paper is to look at the duration of the four-month period before the window dressing of Power Quotient International Co., LTD. (PQI) annual report between 2004 and 2005 was disclosed. The vultures sold 6,373,000 shares of PQI's stock based on the illegally obtained insider information. The empirical results indicate that the vultures' selling did not make PQI's stock price go down during insider period, but PQI's stock price did appear to rise and significantly exceeded the non-insider period. However, the proportion of vultures' selling is negatively correlated with the changes in PQI's stock price. The effect of vultures' selling is indifferent from the effect of non-vultures' selling during insider period. Market liquidity is also affected unfavorably in the presence of vultures' trading. Additionally, the newspaper's reports on PQI's positive or negative news significantly influence the investment decision of investors in Taiwan, and significantly influence the PQI's price changes and market liquidity.

scholarly journals The Impact Of Insider Trading On Market Liquidity In The NASDAQ Market

2011 ◽  
Vol 21 (4) ◽  
Author(s):  
Walayet A. Khan ◽  
H. Kent Baker ◽  
Mukesh Chaudhry ◽  
Suneel K. Maheshwari
Keyword(s):  
Insider Trading ◽  
Market Liquidity ◽  
Order Flow ◽  
Font Size ◽  
Short Term ◽  
Cross Sectional ◽  
The Impact ◽  
The Relationship ◽  
Over Time

<p class="MsoBlockText" style="margin: 0in 0.6in 0pt 0.5in; mso-pagination: none;"><span style="font-style: normal; font-size: 10pt; mso-bidi-font-style: italic;"><span style="font-family: Times New Roman;">This study examines the relationship between insider trading and market liquidity (spread and depth) of NASDAQ-100 stocks.<span style="mso-spacerun: yes;">&nbsp; </span>Tests on an intraday sample of sell trades show no evidence of cross-sectional association between the width of the spread and insider trading, but detect some widening of the spread after the fact.<span style="mso-spacerun: yes;">&nbsp; </span>Overall, our results provide mixed evidence on the ability of NASDAQ dealers to unravel informed order flow and adjust spreads accordingly. <span style="mso-spacerun: yes;">&nbsp;</span>Their short-term behavior suggests an inability to detect insider trading and widen spreads, but their behavior over time suggests that dealers may attempt to recover what they apparently lose at a given point and time. </span></span></p>

scholarly journals Legal Insider Trading and Stock Market Liquidity

De Economist ◽  
2015 ◽  
Vol 164 (1) ◽  
pp. 83-104 ◽  
Author(s):  
Hans Degryse ◽  
Frank de Jong ◽  
Jérémie Lefebvre
Keyword(s):  
Stock Market ◽  
Insider Trading ◽  
Market Liquidity ◽  
Stock Market Liquidity

How to Assure Stable Development in Unstable Financial Environment?

2007 ◽  
pp. 4-26 ◽  
Author(s):  
M. Ershov
Keyword(s):  
Stock Market ◽  
Developed Countries ◽  
Market Liquidity ◽  
Market Mechanisms ◽  
Russian Economy ◽  
The Developed Countries ◽  
Russian Stock Market ◽  
Stable Development ◽  
Financial Environment

Growing involvement of Russian economy in international economic sphere increases the role of external risks. Financial problems which the developed countries are encountered with today result in volatility of Russian stock market, liquidity problems for banks, unstable prices. These factors in total may put longer-term prospects of economic growth in jeopardy. Monetary, foreign exchange and stock market mechanisms become the centerpiece of economic policy approaches which should provide for stable development in the shaky environment.

Impact of Stock Market Liquidity on Investment of Listed Enterprises: Evidence from Vietnam

2016 ◽  
Vol 23 (4) ◽  
pp. 80-96
Author(s):  
TRAN NGOC THO ◽  
DANG NHU Y
Keyword(s):  
Stock Market ◽  
Market Liquidity ◽  
Stock Market Liquidity
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