The authors would like to thank Tom McInish, Giovanni Petrella, Bonnie F. Van Ness and seminar participants at the Securities and Exchange Commission, European Financial Management Association Meeting 2009, Financial Management Association International (FMA) Meeting 2010 and the Capital Markets Cooperative Research Centre for their insightful comments.
How much does an Illegal Insider Trade?†
Article first published online: 4 FEB 2013
© 2013 International Review of Finance Ltd. 2013
International Review of Finance
Volume 13, Issue 2, pages 241–263, June 2013
How to Cite
Frino, A., Satchell, S., Wong, B. and Zheng, H. (2013), How much does an Illegal Insider Trade?. International Review of Finance, 13: 241–263. doi: 10.1111/irfi.12006
- Issue published online: 7 MAY 2013
- Article first published online: 4 FEB 2013
This paper examines the choice of trade size by an illegal insider. Previous literature (i.e. Meulbroek 1992) tends to focus on the price impact of such a trader. Using a unique data set hand-collected from the litigation reports of the Securities and Exchange Commission and court cases, we provide evidence, which suggests that the size of an illegal insider's trade is a function of the value of his private information, the probability of detection and the expected penalty if detected. Our results have important implication for security market regulators.