Informed trading and market efficiency

Lebedeva, Olga

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URN: urn:nbn:de:bsz:180-madoc-329204
Document Type: Doctoral dissertation
Year of publication: 2012
Place of publication: Mannheim
University: Universität Mannheim
Evaluator: Maug, Ernst
Date of oral examination: 10 December 2012
Publication language: English
Institution: Business School > ABWL u. Corporate Finance (Maug 2006-)
Subject: 330 Economics
Subject headings (SWD): Markteffizienz , Aktienmarktanalyse
Keywords (English): Informed trading , market efficiency , corporate announcements , insider trading
Abstract: This dissertation contributes to the on-going discussion about the role of informed trading in the formation of efficient security prices. In Chapter II, I examine the pre-announcement periods with the temporary increases in informed trading. The findings suggest that the market can detect the temporary changes in the information environment of a stock in these periods with the standard measures of information asymmetry. In Chapter III, I analyze how the increases in trading aggressiveness by informed and uninformed traders after earnings announcement releases impact the speed of price adjustment to its new equilibrium level. I find that an increased use of aggressive orders slows down the adjustment process, especially in the situations when the majority of aggressive orders are submitted by uninformed traders. Chapter IV investigates different reasons for the current practice of corporate insiders who represent a group of potentially informed investors to spread their trades over time. The findings suggest that the majority of insider trades are not information-related and that insiders time liquidity of the market.

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