Abstract
I examine the ability of the U.S. investor protection regime to limit insider trading returns, absent Section 16(b) of the Securities Exchange Act of 1934 (the short-swing rule). I find that in this setting, U.S. insiders execute short-swing trades that i) beat the market by approximately 15 basis points per day and ii) systematically divest ahead of disappointing earnings announcements. These results indicate that the bright-line rule restricting short-horizon round-trip insider trading plays a substantial role in protecting outside investors from privately informed insiders in the United States.
Original language | English (US) |
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Pages (from-to) | 1305-1332 |
Number of pages | 28 |
Journal | Journal of Financial and Quantitative Analysis |
Volume | 55 |
Issue number | 4 |
DOIs | |
State | Published - Jun 1 2020 |
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics