Reexamination of the link between insider trading and price efficiency

Wisniewski, Tomasz P. (2004). Reexamination of the link between insider trading and price efficiency. Economic Systems, 28(2) pp. 209–228.



This paper investigates insider trading patterns around quarterly earnings announcements of the companies listed on the Warsaw Stock Exchange. The results are generally consistent with the notion that insiders exploit their foreknowledge of accounting disclosures but cease trading aggressively immediately before the publication date. Their informed trading is shifted to an earlier period in order to make it less explicit and minimize the danger of possible legal action. Furthermore, insider dealing has been shown to have a negligible net effect on stock price efficiency, as the benefits of information transmission are likely to be counterbalanced by the reduction in information acquisition by outsiders. In particular, it has been shown that the market professionals are reluctant to follow companies in which insiders trade actively.

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