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- Title
Profitability of Insider Trades in Extremely Volatile Markets: Evidence from the Stock Market Crash and Recovery of 2000-2003.
- Authors
Gangopahyay, Partha; Yook, Ken C.; Sarwar, Ghulam
- Abstract
In this paper we examine the profitability of corporate insider trades in the volatile markets of 2000-2003. Insiders are known to be contrarian traders. We hypothesize that profits from both contrarian trading and from trading based on useful inside information are large in volatile markets. We find that insider purchases are negatively related to firm size and recent stock returns and positively related to the firm's book-to-market equity ratio. Even after adjusting for contrarian trading, we find that insider trades generate significantly large future profits. This shows that insiders trade on useful private information and that such trades are profitable in volatile markets.
- Subjects
STOCK prices; RENT (Economic theory); FINANCIAL performance; BREAK-even analysis; COST centers (Accounting); FINANCIAL crises
- Publication
Quarterly Journal of Finance & Accounting, 2009, Vol 48, Issue 2, p45
- ISSN
1939-8123
- Publication type
Article