Insider Trading in the OTC Market

Ji-chai Lin, JOHN S. HOWE

Research output: Journal article publicationJournal articleAcademic researchpeer-review

163 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 languageEnglish
Pages (from-to)1273-1284
Number of pages12
JournalThe Journal of Finance
Volume45
Issue number4
DOIs
Publication statusPublished - 1 Jan 1990

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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