Publication Type

Journal Article

Version

acceptedVersion

Publication Date

12-2019

Abstract

Using over 5,000 trades unequivocally based on nonpublic information about firm fundamentals, we find that asymmetric information proxies display abnormal values on days with informed trading. Volatility and volume are abnormally high, whereas illiquidity is low, in equity and option markets. Daily returns reflect the sign of private signals, but bid-ask spreads are lower when informed investors trade. Market makers' learning under event uncertainty and limit orders help explain these findings. The cross-section of information duration indicates that traders select days with high uninformed volume. Evidence from the U.S. SEC Whistleblower Reward Program and the FINRA involvement addresses selection concerns.

Keywords

Private information, information signals, adverse selection proxies, insider trading, trading strategies, liquidity, asset prices, abnormal volume, stock markets, option markets, volatility, SEC

Discipline

Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Finance

Publication

Review of Financial Studies

Volume

32

Issue

12

First Page

4997

Last Page

5047

ISSN

0893-9454

Identifier

10.1093/rfs/hhz029

Publisher

Oxford University Press (OUP): Policy F - Oxford Open Option D

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1093/rfs/hhz029

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