An Empirical Research Of Insider Trading In Chinese Stock Market

With the completion of the stock market system, market participants getincreases, the depth and breadth of the stock market has been steadily broadened. Butwith the development of stock market，there are also some problems. Insider tradingbehavior is one of the irregularities of the stock market, it affects the stock price,damages the interests of public investors, interferes with the normal operation of thestock market order, seriously, it may lead to the crash of stock market, which has beenthe focus of securities regulation. Because our stock market is not strong effective andthe lack of supervision of regulators and so on external factors, and the diversificationstyle of insider trading, the difficult of forensic identify and so on internal cause,makes the regulation of insider trading has been a problem of securities regulators.The purpose of this study is to make empirical analysis of insider trading behavior inChinese stock market, we hope to provide a feasible method to improve the efficiencyof insider trading regulation through this study.Reference to the research results of insider trading behavior of outstandingscholars at home and abroad, in this study,we make the Chinese stock market asresearch object, make empirical research of information asymmetry and insidertrading behavior triggered by it from macro and micro aspects. Using the event studymethod and GARCH model respectively to measure the characteristics of yield rate,liquidity and volatility of stock market, and introduce two new indicators: thecumulative abnormal returns ratio and cumulative abnormal trading volume, throughthat to identify the insider trading behavior, explain the result of the test, and putforward policy recommendations to prevent insider trading.In chapter1, we introduce the background, significance, contents, main methodsof the research and the innovation points in this paper.In chapter2, we introduce the related connotation of insider trading as well as the literature review. Firstly, introduce related connotation of insider trading, and thento review and analysis foreign and domestic theory of insider trading. We canconclude that although within the scope of a certain extent insider trading behaviorhas some positive significance, but in the long run, serious insider trading behavior isnot conducive to the development of the stock market.In chapter3, we introduce the related theory of insider trading, respectivelydefinite the macro and micro information asymmetry, and the insider trading causedby them. Macro information asymmetric is relative to the whole market，and it isproduced by the government management department, securities supervision andadministration department when making decisions that have a significant influence onsecurities price or releasing related information that have a significant effect on stockprice, it seriously damages the three fair principles of stock market and should beresolutely resisted. Microscopic information asymmetry is produced by listedcompany when making the company’s strategic direction or investment and financingdecisions, the resulting insider trading behavior is the insider trading caused bymicrocosmic information asymmetry. Insider trading caused by microscopicinformation asymmetry could be allowed within a certain extent, but serious insidertrading would take adverse effects on the stock market and investors, so it should bestopped.In chapter4, we introduce the empirical test method and the selection of sampledata respectively from the macro and micro aspects. For the research of insidertrading caused by macro information asymmetry, selecting ten policies that havesignificant impact on the stock prices which set by the administrative department inrecent years as samples. Determine whether the insider trading exists through themeasure of the yield and volume indicators. For the research of insider trading causedby micro information asymmetry, selecting20companies which experienced assetpurchase or merger, acquisition and reorganization, and also be punished or judged bythe CSRC and judicial system according to the relevant laws and regulations ofinsider trading and market manipulation from2000to2012.Analyse whether insidertrading will generate excess returns, as well as the change of volatility and liquidity ofstock market that caused by insider trading. In chapter5, we analysis the results of the empirical test, it can be concluded thatinsider trading behavior does exist in Chinese stock market. Through empirical test,we can conclude some common features of stock market when insider trading exists,so as to provide theoretical basis for the regulation of insider trading behavior andthen put forward relevant countermeasures and suggestions.