To fix notation, we denote each insider trade as Trade 0.
We calculated the volatilities using the 60 trades prior the insider trade and the 60 trades before the matched trade.
Our next task is to investigate the extent to which market professionals use their recently discovered knowledge regarding the arrival of an insider trade.
Second, recall from Exhibit 1 that the CARs "reverse" near the time of insider trade execution.
Consistent with prior results for post-announcement trades, both buy and sell portfolios exhibit a price reversal following insider trade execution.
4 Invest/Net provides data from all insider trade filings with the SEC in machine readable form.
112) More recently, in O'Hagan, the Supreme Court, referring to the "`classical theory' of insider trading liability," explained that "[section] 10(b) and Rule 10b-5 are violated when a corporate insider trades in the securities of his corporation on the basis of material, nonpublic information"(113) and, referring to the misappropriation theory, asserted that "the fiduciary's fraud is consummated, not when the fiduciary gains the confidential information, but when, without disclosure to his principal, he uses the information to purchase or sell securities.
642, 651-52 (1997) ("Under the `traditional' or `classical theory' of insider trading liability, [sections] 10(b) and Rule 10b-5 are violated when a corporate insider trades in the securities of his corporation on the basis of material, nonpublic information.
W]hen an insider trades while in possession of material non-public information, a strong inference arises that such information was used by the insider in trading.
First, because firms without insider trades are not excluded, we obtain a better estimate of insider-trading propensities and their association with stock returns.
Our interest lies in ascertaining the propensity for insider trades in one period to be associated with security return performance in prior, concurrent, and following periods.