Insider Trading: What Really Protects U.S. Investors?

Research output: Contribution to journalArticlepeer-review

5 Scopus citations


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 languageEnglish (US)
Pages (from-to)1305-1332
Number of pages28
JournalJournal of Financial and Quantitative Analysis
Issue number4
StatePublished - Jun 1 2020

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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