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Does Insider Trading Raise Market Volatility?
Author: Shang-Jin Wei and Mr. Julan Du
Series:
IMF Working Papers
Volume/Issue:
Volume 2003: Issue 051
Language:
English
Publication Date:
01 Mar 2003
DOI:
https://doi.org/10.5089/9781451847130.001
ISBN:
9781451847130
ISSN:
1018-5941
Pages:
42
Keywords:
WP; insider trading index; market volatility; anti-insider-trading law; growth rate; insider trading prohibition; insider trading Sanctions Act; insider trading; insider trading activity; Stock markets; Legal support in revenue administration; Income distribution; Stocks; Asset prices; Europe; Africa
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper studies the role of insider trading in explaining cross-country differences in stock market volatility. The central finding is that countries with more prevalent insider trading have more volatile stock markets, even after one controls for liquidity/maturity of the market and the volatility of the underlying fundamentals (volatility of real output and of monetary and fiscal policies). Moreover, the effect of insider trading is quantitively significant when compared with the effect of economic fundamentals.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund