An investigation of insider trading profits in the Spanish stock market

Brío, Esther B. Del; Miguel, Alberto; Perote, Javier

doi:10.1016/s1062-9769(01)00103-x

Cited by 68 publications

(12 citation statements)

References 57 publications

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“…If informed traders are present in the market, this should be reflected in the spread. Insiders, when trading on their inside information, are better informed counterparties, and any uninformed investor trading against them will lose in the transaction, a notion supported by much research detailing the profitability of insiders even when trading legally (see e.g., for the United States [Jaffe, ; Finnerty, ; Seyhun, , ; Rozeff and Zaman, ; Lakonishok and Lee, ]; for Canada [Baesel and Stein, ]; for Spain [Del Brio, Miguel and Perote, ]; for New Zealand [Etebari, Tourani‐Rad and Gilbert, ]; for the United Kingdom [Pope, Morris and Peel, ; Friederich, Gregory, Matatko and Tonks, ]). Hence, if a law reduces the prevalence of insider trading, then the proportion of informed traders in the market should decrease, and this should lead to a decrease in the spread.…”

Section: Methodology and Datamentioning

confidence: 99%

Do Criminal Sanctions Deter Insider Trading?

Frijns

Gilbert

Tourani‐Rad

2013

The Financial Review

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Many developed markets have taken what appears to be a tough stance on illegal insider trading through the use of criminal sanctions. Although criminal sanctions represent a much greater penalty than civil sanctions, the higher burden of proof required makes their enforceability weaker. This trade-off between severity and enforceability makes the impact of criminal sanctions ambiguous. In this paper, we empirically examine this issue by studying the deterrence of insider trading following the introduction of criminal sanctions in a developed market. Significant changes in sanction regimes are rare, especially when criminal sanctions are introduced without other changes. In February 2008, New Zealand introduced criminal sanctions for insider trading. This change of law offers a unique setting in which to examine the deterrence effect of criminalization. Using measures for the cost of trading, degree of information asymmetry, and probability of informed trading, we find that the enactment of this law led to a worsening in these measures. These findings suggest that the weaker enforceability of criminalization outweighs the associated increased severity of the penalties.JEL Codes : C22, D82, G18

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Section: Methodology and Datamentioning

confidence: 99%

Do Criminal Sanctions Deter Insider Trading?

Frijns

Gilbert

Tourani‐Rad

2013

The Financial Review

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“…As expected for insiders of Belgian listed companies, our results show that net sales transactions yield higher abnormal returns than net purchases. Other studies documenting that sales are more informative than purchases include Del Brio et al (2002) and Cheuk et al (2006). in millions of euros.…”

Section: Resultsmentioning

confidence: 99%

“…In recent years however, research on insider trading in the European and Asian stock market has emerged. Studies on European stock markets were performed for Germany (Betzer, Theissen 2009), Spain (Del Brio et al 2002), Poland (Wisniewski, Bohl 2005), the UK (Gregory et al 1994;Fidrmuc et al 2006), Italy (Bajo, Petracci 2006) and the Netherlands (Degryse et al 2009). Studies on Asian stock markets were performed for Taiwan (Chiang et al 2004), Hong Kong (Wong et al 2000;Cheuk et al 2006) and Malaysia (Wong et al 2010).…”

Section: Insider Trading: Literature Reviewmentioning

confidence: 99%

“…In addition, numerous studies have documented that insiders are able to convert their informational benefit into excess stock market returns (e.g. Seyhun 1986;Lakonishok, Lee 2001;Del Brio et al 2002;Wisniewski, Bohl 2005;Bajo, Petracci 2006;Cheuk et al 2006;Betzer, Theissen 2009). Also, using the 1997 Asian financial crisis as a test case, Cheong et al (2007) and Lim et al (2008) concluded that the efficiency of financial markets is adversely affected by the occurrence of a financial crisis.…”

Section: Introductionmentioning

confidence: 99%

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The Impact of the Financial Crisis on Insider Trading Profitability in Belgium

Geyt

Cauwenberge

Bauwhede

2012

Journal of Business Economics and Management

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The 2007 global financial crisis led to a chaotic financial environment characterized by highly uncertain and volatile stock markets. This created additional uncertainty about the fundamental value of shares and potentially increased the benefit of inside information. In this paper, we use event study methodology to examine whether Belgian corporate insiders were able to benefit from these turbulent market conditions. Given the large weight of financial institutions, the Belgian stock market was especially vulnerable to the financial crisis and provides an interesting environment to test this hypothesis. Our results show that, while insiders are generally able to earn abnormal returns, these returns are significantly higher during the years of the financial crisis.

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“…Generally speaking, insider trading activity is associated with abnormal returns (Lakonishok and Lee, 1998;Del Brio, Miguel and Perote, 2002;Wiśniewski, 2004;Jeng, Metrick and Zeckhauser 1999), while it represents only a small proportion of all the transactions in relation to the values of the company. Del Brio, Miguel and Perote (2002) demonstrate, based on the example of internal trading in the Spanish market, that other investors are not able to achieve the same rate of return as those that have access to confidential information. Additionally they claim that, in the long term, insider transactions do not provide valuable information from the point of view of external investors.…”

Section: Literature Reviewmentioning

confidence: 99%

An Analysis of Insider Trading in the Credit Derivatives Market Using the Event Study Methodology

Wareluk¹

2013

MBA. CE

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Purpose: In this paper I investigate the information fl ow between the credit default swap market and the stock market as well as insider trading in the credit default swap market. Methodology:For my analysis I use the event study methodology. Using the event study methodology I calculate abnormal stock returns and abnormal credit default swap premium changes. The analysis is based on 175,874 observations collected for 92 companies between the years 2001 and 2010. Findings:The results show that the information fl ow from the credit default swap market to the stock market is the most signifi cant in terms of negative rating outlooks. The information fl ow is much less signifi cant in relation to negative surprises during announcements of annual fi nancial results and rating upgrades. Evidence of insider trading is also most evident with reference to negative rating outlooks. Additionally, a distinctive feature of the credit default swap market and the stock market is the asymmetric response to negative and positive credit information. Research limitations:The event study methodology does not consider other potentially important reasons for the information fl ow between markets than the ones actually investigated. The credit events and credit risk information used in this research are just a proposal and can be extended by future researchers.Originality: This paper discusses a new research area. The main research area in terms of insider trading is still the stock market, with special focus on the US market. I decided to explore the insider trading phenomenon in the credit default swap market. I only considered contracts that are quoted with reference to European underlying assets. This part of the fi nancial market is attractive in terms of economic research as credit derivatives are more commonly used not only in North America but also in Europe.

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An investigation of insider trading profits in the Spanish stock market

Cited by 68 publications

References 57 publications

Do Criminal Sanctions Deter Insider Trading?

Do Criminal Sanctions Deter Insider Trading?

The Impact of the Financial Crisis on Insider Trading Profitability in Belgium

An Analysis of Insider Trading in the Credit Derivatives Market Using the Event Study Methodology

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