Detecting the presence of insider trading via structural break tests
Detecting the presence of insider trading via structural break tests
The occurrence of abnormal returns before the unscheduled announcement of price sensitive information is a potential indicator of insider trading. We identify insider trading with a structural change in the intercept of an extended capital asset pricing model. To detect such a change we introduce a consistent timing structural break test (CTSB) based upon a U-statistic type process. Unlike the traditional CUSUM test, the CTSB test provides a consistent estimator of the timing of a break in the intercept that occurs across the whole evaluation period. We apply our test to a rich data set covering 370 price sensitive announcements relating to FTSE 350 companies. Our test is able to detect potential insider trading far more reliably than the standard CUSUM test. We also show that the majority of suspected insider trading takes place in the 25 days prior to the release of market sensitive information
2820-2828
Olmo, Jose
706f68c8-f991-4959-8245-6657a591056e
Pilbeam, Keith
9a971256-9582-4b70-b6a8-bcafe7982218
Pouliot, William
d5c39d0e-0521-4c4d-a753-d635079de94b
November 2011
Olmo, Jose
706f68c8-f991-4959-8245-6657a591056e
Pilbeam, Keith
9a971256-9582-4b70-b6a8-bcafe7982218
Pouliot, William
d5c39d0e-0521-4c4d-a753-d635079de94b
Olmo, Jose, Pilbeam, Keith and Pouliot, William
(2011)
Detecting the presence of insider trading via structural break tests.
Journal of Banking and Finance, 35 (11), .
(doi:10.1016/j.jbankfin.2011.03.013).
Abstract
The occurrence of abnormal returns before the unscheduled announcement of price sensitive information is a potential indicator of insider trading. We identify insider trading with a structural change in the intercept of an extended capital asset pricing model. To detect such a change we introduce a consistent timing structural break test (CTSB) based upon a U-statistic type process. Unlike the traditional CUSUM test, the CTSB test provides a consistent estimator of the timing of a break in the intercept that occurs across the whole evaluation period. We apply our test to a rich data set covering 370 price sensitive announcements relating to FTSE 350 companies. Our test is able to detect potential insider trading far more reliably than the standard CUSUM test. We also show that the majority of suspected insider trading takes place in the 25 days prior to the release of market sensitive information
Text
__http_/ad.doubleclick.net/adj/els.SDsub/ISSN03784266;ISSN=03784266;pg=unknown;'
- Other
More information
Published date: November 2011
Organisations:
Economics
Identifiers
Local EPrints ID: 348611
URI: http://eprints.soton.ac.uk/id/eprint/348611
ISSN: 0378-4266
PURE UUID: 538ccfcb-5852-46e7-924e-240d58be0348
Catalogue record
Date deposited: 15 Feb 2013 15:09
Last modified: 15 Mar 2024 03:46
Export record
Altmetrics
Contributors
Author:
Keith Pilbeam
Author:
William Pouliot
Download statistics
Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.
View more statistics
