Journal of Financial and Quantitative Analysis Vol. 55 No. 4 2020
Insider Trading: What Really Protects U.S. Investors?
open access
Abstract
I examine the ability of the U.S. investor protection regime to limit insider trading returns, absent Section 16(b) of the Securities Exchange Act of 1934 (the short-swing rule). I find that in this setting, U.S. insiders execute short-swing trades that i) beat the market by approximately 15 basis points per day and ii) systematically divest ahead of disappointing earnings announcements. These results indicate that the bright-line rule restricting short-horizon round-trip insider trading plays a substantial role in protecting outside investors from privately informed insiders in the United States.
- DOI
- 10.1017/s0022109019000292
- Volume
- 55
- Issue
- 4
- Pages
- 1305-1332
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref