Does Insider Trading Raise Market Volatility?
HKIMR Working Paper No. 7/2002
42 Pages Posted: 28 Jan 2006
There are 2 versions of this paper
Does Insider Trading Raise Market Volatility?
Does Insider Trading Raise Market Volatility?
Date Written: March 2003
Abstract
This paper studies the role of insider trading in explaining cross-country differences in stock market volatility. The central finding is that countries with more prevalent insider trading have more volatile stock markets, even after one controls for liquidity/maturity of the market and the volatility of the underlying fundamentals (volatility of real output and of monetary and fiscal policies). Moreover, the effect of insider trading is quantitively significant when compared with the effect of economic fundamentals.
Keywords: insider trading, market volatility
JEL Classification: F3, G1
Suggested Citation: Suggested Citation
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