To read this content please select one of the options below:

Strategic illegal insider trading prior to price sensitive announcements

Thomas H. McInish (The University of Memphis, Memphis, Tennessee, USA)
Alex Frino (University of Sydney, Sydney, Australia)
Frank Sensenbrenner (Capital Markets Co‐operative Research Centre and University of Sydney, Sydney, Australia)

Journal of Financial Crime

ISSN: 1359-0790

Article publication date: 19 July 2011




Using data for actual insider trading cases prosecuted by the Securities and Exchange Commission, the paper aims to investigate whether insiders trade strategically to avoid detection.


The paper analyzes actual insider trades prior to price sensitive announcements.


It is found that insiders are more likely to trade on high volume days, which indicates an effort to hide their trades. Further, insider trading raises the number of days with abnormally high trading volume only slightly, again indicating that insiders are avoiding attracting attention. No evidence is found that insider trading intensity increases on the insider trading day closest to the announcement day. The hypothesis that index returns for insider trading days and non‐trading days are the same cannot be rejected, which is consistent with insiders avoiding detection. For stocks sold by insiders, returns are higher for insider trading days than for non‐insider trading days. Hence, insiders are selling on days when the market is up, which tends to hide their trading. But for stocks bought by insiders, returns are significantly higher on insider trading days than on non‐insider‐trading days, indicating that in this case insiders may attract unwanted attention.


The research may be useful to those attempting to detect insider trades.



McInish, T.H., Frino, A. and Sensenbrenner, F. (2011), "Strategic illegal insider trading prior to price sensitive announcements", Journal of Financial Crime, Vol. 18 No. 3, pp. 247-253.



Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited

Related articles