Hostname: page-component-84b7d79bbc-tsvsl Total loading time: 0 Render date: 2024-07-25T22:27:34.823Z Has data issue: false hasContentIssue false
  • English
  • Français

The Value of Information: Inferences from the Profitability of Insider Trading

Published online by Cambridge University Press:  06 April 2009

Jerome B. Baesel  and
Garry R. Stein
Get access Rights & Permissions [Opens in a new window]

Extract

Information may be the key to differential rewards from investment in capital markets. Corporate insiders are thought to have information not available to others which provides them an advantage in investment activities. This has piqued the interest of regulatory officials and investors. For example, regulators in both Canada and the United States have required insiders to report their trading activities and have placed restrictions on the nature of these activities. Additionally, investors have attempted to use information on insider trading activities as a foundation for their own investment strategies.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 14 , Issue 3 , September 1979 , pp. 553 - 571
Copyright
Copyright © School of Business Administration, University of Washington 1979

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

[1]Ashley, C. A. “Concentration of Economic Power.” Canadian Journal of Economics and Political Science, Vol. 23 (02 1957), pp. 105–108.CrossRefGoogle Scholar
[2]Ball, R., and Brown, P.. “An Empirical Evaluation of Accounting Income.” Journal of Accounting Research (Autumn 1968), pp. 159–178.CrossRefGoogle Scholar
[3]Black, F. “Capital Market Equilibrium with Restricted Borrowing.” Journal of Business, Vol. 45, No. 3 (07 1972), pp. 444–454.CrossRefGoogle Scholar
[4] Canada Business Corporations Act, S.C. 1974 – 1975, c. 33, as am. S.C. 1976–77, c. 52.Google Scholar
[5]Canada Corporations Act, R.S.C. 1970, c.c. 32, as am. by R.S.C. 1970, c. 10 (1st Supp.), S.C. 1970–71–72, c. 43, S.C. 1972, c. 17.Google Scholar
[6]Clement, W.The Canadian Corporate Elite: An Analysis of Economic Power. Toronto, Ontario: McClelland and Stewart, Ltd. (1975), pp. 156–7, 212–3, 446–451.Google Scholar
[7]Fama, E. “Efficient Capital Markets: A Review of Theory and Empirical Work.” Journal of Finance, Vol. 25, No. 2 (05 1970), pp. 383–420.CrossRefGoogle Scholar
[8]Fama, E.; Fisher, L.; Jensen, M.; and Roll, R.. “The Adjustment of Stock Prices for New Information.” International Economic Review (02 1969), pp. 1–21.CrossRefGoogle Scholar
[9]The Financial Post, Directory of Directors (1968, 1969, 1970, 1971, 1972), Toronto, Ontario.Google Scholar
[10]Finnerty, J. E. “Insiders and Market Efficiency.” Journal of Finance, Vol. XXI, No. 4 (09 1976), pp. 1141–1148.CrossRefGoogle Scholar
[11]Finnerty, J. E.. “Insider's Activity and Insider Information: A Multivariate Analysis.” Journal of Financial and Quantitative Analysis, Vol. XI, No. 2 (06 1976), pp. 205–215.CrossRefGoogle Scholar
[12]Gonedes, N. J. “The Capital Market, the Market for Information, and External Accounting.” Journal of Finance, Vol. XXXI, No. 2 (05 1976), pp. 611–630.CrossRefGoogle Scholar
[13]Grossman, S. J., and Stiglitz, J. E.. “Information and Competitive Price Systems.” The American Economic Review (05 1976), pp. 246–253.Google Scholar
[14]Hirshleifer, J. Where Are We in the Theory of Information. Unpublished working paper. Department of Economics, UCLA.Google Scholar
[15]Hirshleifer, J.. “The Private and Social Value of Information and the Reward to Inventive Activity.” American Economic Review (09 1971), pp. 561–574.Google Scholar
[16]Jaffe, J. F. “Special Information and Insider Trading.” Journal of Business, Vol. 47, No. 3 (07 1974), pp. 410–428.CrossRefGoogle Scholar
[17]Jensen, M. C. “Risk, the Pricing of Capital Assets, and the Evaluation of Investment Portfolios.” Journal of Business (04 1969), pp. 167–247.CrossRefGoogle Scholar
[18]Lintner, J. “The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets.” Review of Economics and Statistics, Vol. 47 (02 1965), pp. 13–37.CrossRefGoogle Scholar
[19]Manne, H. G.Insider Trading and the Stock Market. New York (1966).Google Scholar
[20]Miller, E. M. “Risk, Uncertainty and Divergence of Opinion.” Journal of Finance, Vol. XXXII, No. 4 (09 1977), pp. 1151–1168.CrossRefGoogle Scholar
[21]Mood, A. M., and Graybill, F. A.. Introduction to the Theory of Statistics, 2nd ed.New York: McGraw–Hill, Inc. (1963).Google Scholar
[22]Mossin, J. “Equilibrium in a Capital Asset Market.” Econometrica (04 1968), pp. 215–229.Google Scholar
[23]Ontario Securities Act, R.S.O. (1970), c. 426.Google Scholar
[24]Porter, J. “Concentration of Economic Power and the Economic Elite of Canada.” Canadian Journal of Economics and Political Science, Vol. 22, No. 2 (05 1956), pp. 199–220.CrossRefGoogle Scholar
[25]Porter, J.. The Vertical Mosaic. University of Toronto Press, Toronto, Canada (1965), pp. 233–239.CrossRefGoogle Scholar
[26]Pratt, S. P., and Devere, C. W.. “Relationship between Insider Trading and Rates of Return for N.Y.S.E. Common Stock, 1960–66.” In Modern Developments in Investment Management, edited by Lorie, James H. and Brealey, Richard. New York: Praeger Publishers (1970).Google Scholar
[27]Roll, R. “A Critique of the Asset Pricing Theory's Tests; Part 1: On Past and Potential Testability of the Theory.” Journal of Financial Economics, Vol. 4, No. 2 (03 1977).CrossRefGoogle Scholar
[28]Securities Exchange Act of 1934, 15 U.S.C.A. § 78p.Google Scholar
[29]Scholeas, M. G. A Test of the Competitive Market Hypothesis, the Market for New Issues and Secondary Offerings. Ph.D. Thesis, University of Chicago (1969).Google Scholar
[30]Sharpe, W. F. “Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk.” Journal of Finance, Vol. XIX, No. 3 (09 1964), pp. 425–442.Google Scholar
[31]Tinic, S. M., and West, R. R.. “Marketability of Common Stocks in Canada and the U.S.A.: A Comparison of Agent versus Dealer Dominated Markets.” Journal of Finance, Vol. XXIX, No. 3 (06 1974), pp. 729–746.CrossRefGoogle Scholar
[32]Wein, G. H.1977 SIE Investor, Issue 23. New York (12 1977).Google Scholar