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
Citation
KACPERCZYK, Marcin and PAGNOTTA, Emiliano Sebastian.
Chasing private information. (2019). Review of Financial Studies. 32, (12), 4997-5047.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7027
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1093/rfs/hhz029