Does Insider Trading Raise Market Volatility?

NBER Working Paper No. 9541^*
Issued in March 2003
NBER Program(s): IFM AP

---- Abstract -----

This paper studies the role of insider trading in explaining cross-country differences in stock market volatility. It introduces a new measure of insider trading. 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 quantitatively significant when compared with the effect of economic fundamentals.

^*Published: Du, Julan and Shang-Jin Wei. "Does Insider Trading Raise Market Volatility?," Economic Journal, 2004, v114(498,Oct), 916-942.

Would you like an annual subscription to NBER Working Papers? Click here for more information.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.
Information for subscribers and others expecting no-cost downloads

Machine-readable bibliographic record - MARC, RIS, BibTeX