How much does an Illegal Insider Trade?



Publication Details

Frino, A., Satchell, S., Wong, B. & Zheng, H. (2013). How much does an Illegal Insider Trade?. International Review Of Finance, 13 (2), 241-263.


This paper examines the choice of trade size by an illegal insider. Previous literature (i.e. Meulbroek 1992) tends to focus on the price impact of such a trader. Using a unique data set hand-collected from the litigation reports of the Securities and Exchange Commission and court cases, we provide evidence, which suggests that the size of an illegal insider's trade is a function of the value of his private information, the probability of detection and the expected penalty if detected. Our results have important implication for security market regulators

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