Do Proxies for Informed Trading Measure Informed Trading? Evidence from Illegal Insider Trades
Event details
Date | 08.06.2018 |
Hour | 10:30 › 12:30 |
Speaker | Kenneth AHERN (USC Marshall School of Business) |
Location | |
Category | Conferences - Seminars |
This paper exploits hand-collected data on illegal insider trades to provide new evidence of the ability of standard measures of illiquidity to detect informed trading. Controlling for unobserved cross-sectional and time-series variation, sampling bias, and strategic timing of insider trades, I find that when information is short-lived, absolute order imbalance and the autocorrelation of order flows are statistically and economically robust predictors of insider trading. However, when information is long-lasting, insiders strategically time their trades to avoid illiquidity and none of the measures I consider are reliable predictors of insider trading, including bid-ask spreads, Kyle’s λ, and Amihud illiquidity.
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