An Unreliable Canary: Insider Trading, the Cash Flow Hypothesis and the Financial Crisis’

Date

2016-05-16

Advisors

Journal Title

Journal ISSN

ISSN

Volume Title

Publisher

Elsevier

Type

Article

Peer reviewed

Yes

Abstract

This paper investigates whether measures of aggregated insider trading could have predicted the wider economic change that occurred in the UK around the time of the financial crisis. Seyhun's (1988, 1992) cash flow hypothesis is the underpinning rationale driving the investigation. Within a vector auto-regressive framework, this study disentangles the relationship between returns and the activities of insiders in UK listed firms in order to validate Seyhun's assertions in this context. Findings suggest that, unlike the US, the relationship is not present. Instead, aggregate measures of trading decisions showthat insiders aremore likely driven by public perception than by private information.

Description

Keywords

insider trading, cash flow hypothesis

Citation

Lambe, B. (2016) An Unreliable Canary: Insider Trading, the Cash Flow Hypothesis and the Financial Crisis. International Review of Financial Analysis. 46, pp. 151-158

Rights

Research Institute

Finance and Banking Research Group (FiBRe)