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Insider Trading Restrictions and the Stock Market: Evidence from the Amsterdam Stock Exchange

Vermaelen T. (1996). 
Insider Trading Restrictions and the Stock Market: Evidence from the Amsterdam Stock Exchange.
 European Economic Review40, pp1591-1603.
Award Winning
Journal Article
This paper examines the effect of introducing insider trading restrictions on the behaviour of the Amsterdam Stock Exchange. From 1987 on, insiders are no longer allowed to trade two months before an annual earnings announcement. The results indicate that stocks became less liquid (when liquidity is measured by trading volume) when insiders were not allowed to trade. The authors also find some evidence that the introduction of insider trading restrictions reduced the stock market’s speed of adjustment to positive earnings news.
Faculty

Emeritus Professor of Finance