Show simple item record

dc.contributor.authorGao, George P.
dc.contributor.authorMa, Qingzhong
dc.description.abstractWe examine the phenomenon of insider silence, periods when corporate insiders do not trade. Our evidence strongly supports the jeopardy hypothesis that regulations inhibit insiders from trading on extreme information, implying a relation between insider silence and extreme future returns. First, insiders of merger targets refrain from buying in the months before the merger announcement, and insiders of bankruptcy firms refrain from selling before the bankruptcy filing. Second, among firms that are likely to have bad news, insider silence predicts significant negative future returns, which are even lower than when insiders net sell. Further, the negative information in insider silence is gradually incorporated into stock prices, and a significant portion of it is released around quarterly earnings announcements. Finally, the price inefficiency due to insider silence is pervasive, and market frictions make it worse.
dc.rightsRequired Publisher Statement: © Cornell University. This report may not be reproduced or distributed without the express permission of the publisher.
dc.subjectinsider trading
dc.subjectinsider silence
dc.subjectshort interest
dc.subjectprice efficiency
dc.subjectlimits to arbitrage
dc.titleThe Sound of Silence: What Do We Know When Insiders Do Not Trade?
dc.description.legacydownloads2013_Gao_Sound_of_silence.pdf: 205 downloads, before Aug. 1, 2020.
local.authorAffiliationGao, George P.: Cornell University
local.authorAffiliationMa, Qingzhong: Cornell Universtiy

Files in this item


This item appears in the following Collection(s)

Show simple item record