Insider Trading: What Really Protects U.S. Investors?

Research output: Contribution to journalArticle

Abstract

I examine the ability of the U.S. investor protection regime to limit insider trading returns, absent Section 16(b) of the Securities Exchange Act of 1934 (the short-swing rule). I find that, in this setting, U.S. insiders execute short-swing trades that i) beat the market by about 15 basis points per day and ii) systematically divest ahead of disappointing earnings announcements. These results indicate that the bright-line rule restricting short-horizon roundtrip insider trading plays a substantial role in protecting outside investors from privately informed insiders in the United States.

Original languageEnglish (US)
JournalJournal of Financial and Quantitative Analysis
DOIs
StateAccepted/In press - Jan 1 2019

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ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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