The Analysis Of Stock Price Volatility During Insider Trading

Insider trading exerts a bad influence on stock market, and most of the countriesall over the world try their best to prevent it from happening. However, insidertrading is widespread and hidden, making it difficult for regulators to supervise.Even though it is important to make a study of insider trading, seldom has anyexisting research empirically tested the impact of insider trading on the stock price.Therefore, in this study, we analyze some important cases of insider trading in China,in order to find out the influence of insider trading on the stock price, the rate ofreturn and the turnover rate. Since there are quite a lot of differences betweenChinese stock market and US stock market, in this study, using the methods ofAmerican researchers for reference and combining the situation of China, weanalyze the influence of insider trading in China and propose some suggestions.In this study, we choose cases of famous insider trading in the Chinese stockmarket from year2007to year2012as our targets to analyze the main characteristicsof insider trading in China. The analysis includes insiders, the types of insidertrading information, the punishment and the characteristics of insider trading. On theother hand, we also empirically test the influence of insider trading on stock pricefluctuations, the rate of return and the turnover rate, as well as how to distinguishinsider trading. As a consequence, we come to the conclusion that the stock price andturnover rate are much higher during the period of insider trading. In addition, duringthe analysis of the impact of insider trading on the rate of turn, we find out thatinformation disclosure increases the cases of hedging and decreases the cases ofinformation asymmetry, especially when it comes to long term effects, comparedwith short term effects. Moreover, we use Logistic model to propose insider trading distinguish system. At the end of this study, we come up with some suggestions forregulators, based on our conclusion and the situation of Chinese stock market.