Insider trading in Hong Kong : tests of stock returns and trading frequency

Michael Arthur FIRTH, T. Y. LEUNG, Oliver M. RUI

Research output: Journal PublicationsJournal Article (refereed)

6 Citations (Scopus)

Abstract

The main purpose of this paper is to examine the legal insider trading activities by directors of companies listed on the Hong Kong Exchange over the period 1993 to 1999. One characteristic of insider trading in Hong Kong is the high frequency of transactions and the large amounts of money involved. Inside purchases appear to signal and correct undervaluation and inside sales appear to signal and correct overvaluation. In contrast to research from Britain and the United States, insider sales are more informative than purchases. On average, insiders earn HK$91,297 per trade, while outsiders who mimic insiders' transactions earn minimal returns. Many firms suffer from infrequent trading and our results are consistent with directors engaging in inside transactions so as to help create a market for the shares. In additional tests, we find that the frequency of insider trading is a function of information asymmetry.
Original languageEnglish
Pages (from-to)505-533
Number of pages29
JournalReview of Pacific Basin Financial Markets and Policies
Volume14
Issue number3
DOIs
Publication statusPublished - 1 Sep 2011

Fingerprint

Stock returns
Hong Kong
Insider
Insider trading
Purchase
Listed companies
Outsider
Asymmetry of information
Undervaluation
Trading activity
Overvaluation

Keywords

  • Insider trading; stock returns; trading frequency

Cite this

FIRTH, Michael Arthur ; LEUNG, T. Y. ; RUI, Oliver M. / Insider trading in Hong Kong : tests of stock returns and trading frequency. In: Review of Pacific Basin Financial Markets and Policies. 2011 ; Vol. 14, No. 3. pp. 505-533.
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Insider trading in Hong Kong : tests of stock returns and trading frequency. / FIRTH, Michael Arthur; LEUNG, T. Y.; RUI, Oliver M.

In: Review of Pacific Basin Financial Markets and Policies, Vol. 14, No. 3, 01.09.2011, p. 505-533.

Research output: Journal PublicationsJournal Article (refereed)

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