Insider Trading in the OTC Market

Ji-chai Lin; JOHN S. HOWE

doi:10.1111/j.1540-6261.1990.tb02436.x

Insider Trading in the OTC Market

Ji-chai Lin, JOHN S. HOWE

Research output: Journal article publication › Journal article › Academic research › peer-review

181 Citations (Scopus)

Abstract

In this paper, we examine the profitability of insider trading in firms whose securities trade in the OTC/NASDAQ market. Although the evidence suggests timing and forecasting ability on the part of insiders, high transaction costs (especially bid‐ask spreads) appear to eliminate the potential for positive abnormal returns from active trading. By implication, outside investors who mimic the trading of insiders are also precluded from earning abnormal profits. In addition, we provide evidence on the determinants of insiders' profits. The data suggest that insiders closer to the firm trade on more valuable information than insiders removed from the firm. 1990 The American Finance Association

Original language	English
Pages (from-to)	1273-1284
Number of pages	12
Journal	The Journal of Finance
Volume	45
Issue number	4
DOIs	https://doi.org/10.1111/j.1540-6261.1990.tb02436.x
Publication status	Published - 1 Jan 1990

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics

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10.1111/j.1540-6261.1990.tb02436.x

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Insider Trading in the OTC Market

Abstract

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