Cancellable Insider Trading Plans: An Analysis of SEC Rule 10b5-1

Research output: Contribution to journalArticlepeer-review

4 Scopus citations


Rule 10b5-1 enables insiders to preplan future trades before becoming informed. Within a strategic rational expectations equilibrium framework, I characterize an insider's unique optimal trading plan, which balances portfolio diversification against exploitation of the rule's selective termination option. Because the rule reduces adverse selection and provides insurance against bad outcomes, the rule generally improves welfare for both the insider, who later becomes informed, and uninformed outsiders, provided there exists a sufficient degree of information asymmetry. Eliminating the rule's selective termination option results in an even greater welfare improvement under a large subset of parametric conditions. Received March 9, 2018; editorial decision January 11, 2019 by Editor Wei Jiang.

Original languageEnglish (US)
Pages (from-to)4947-4996
Number of pages50
JournalReview of Financial Studies
Issue number12
StatePublished - Dec 1 2019

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


Dive into the research topics of 'Cancellable Insider Trading Plans: An Analysis of SEC Rule 10b5-1'. Together they form a unique fingerprint.

Cite this