Insider trading in Hong Kong : tests of stock returns and trading frequency
Document Type
Journal article
Source Publication
Review of Pacific Basin Financial Markets and Policies
Publication Date
9-1-2011
Volume
14
Issue
3
First Page
505
Last Page
533
Publisher
World Scientific Publishing Co. Pte. Ltd.
Keywords
Insider trading; stock returns; trading frequency
Abstract
The main purpose of this paper is to examine the legal insider trading activities by directors of companies listed on the Hong Kong Exchange over the period 1993 to 1999. One characteristic of insider trading in Hong Kong is the high frequency of transactions and the large amounts of money involved. Inside purchases appear to signal and correct undervaluation and inside sales appear to signal and correct overvaluation. In contrast to research from Britain and the United States, insider sales are more informative than purchases. On average, insiders earn HK$91,297 per trade, while outsiders who mimic insiders' transactions earn minimal returns. Many firms suffer from infrequent trading and our results are consistent with directors engaging in inside transactions so as to help create a market for the shares. In additional tests, we find that the frequency of insider trading is a function of information asymmetry.
DOI
10.1142/S0219091511002317
Print ISSN
02190915
E-ISSN
17936705
Publisher Statement
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Firth, M., Leung, T. Y., & Rui, O. M. (2011). Insider trading in Hong Kong: Tests of stock returns and trading frequency. Review of Pacific Basin Financial Markets and Policies, 14(3), 505-533. doi: 10.1142/S0219091511002317