The authors are grateful to John Doukas (the editor) and an anonymous referee for their insights that greatly strengthened the paper. The authors also thank participants at the FMA 2010 meeting in New York and especially Bonnie Van Ness (the discussant) for their helpful comments and suggestions.
Time-Varying Liquidity Trading, Private Information and Insider Trading
Version of Record online: 13 FEB 2012
© 2012 Blackwell Publishing Ltd
European Financial Management
Volume 20, Issue 2, pages 321–351, March 2014
How to Cite
Lei, Q. and Wang, X. (2014), Time-Varying Liquidity Trading, Private Information and Insider Trading. European Financial Management, 20: 321–351. doi: 10.1111/j.1468-036X.2011.00634.x
- Issue online: 14 MAR 2014
- Version of Record online: 13 FEB 2012
- time varying;
- liquidity trading;
- insider trading
This paper investigates the insider trading before scheduled versus unscheduled corporate announcements to explore how corporate insiders utilise their private information in response to the time-varying liquidity trading. Using a comprehensive insider trading database, we show that: (1) the insider's propensity to trade increases in the amount of liquidity trading before both the scheduled and unscheduled announcements; (2) insiders buy (sell) more before positive (negative) announcements; and (3) insider purchases are more profitable before unscheduled announcements than before scheduled ones. They suggest that insiders time their trades around scheduled and unscheduled announcements to exploit the varying extent of liquidity trading.