Information asymmetry and cross-sectional variation in insider trading

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147 Scopus citations


We investigate the relationship of candidate information asymmetry measures to aspects of insiders' trades. For two of the measures, the median absolute abnormal return over past earnings announcements (MAG_ AR) and whether the firm reports R&D expenditures, associations are consistent with the predictions of a price-taking theory of informed trade. Also, insiders' profits are significantly higher when MAG_AR is greater. For the other measures we consider, associations are inconsistent with the predicted relationships, suggesting that either those measures are poor proxies for information asymmetry or models of informed trade are not descriptive.

Original languageEnglish (US)
Pages (from-to)195-232
Number of pages38
JournalContemporary Accounting Research
Issue number1
StatePublished - 2007

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


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