Research On The Information Content Of Insiders' Increasing And Decreasing Holdings Based On The Stock Market Regime

For a long time,insiders of listed companies have always been regarded as information superiority groups.Compared with other investors in capital markets,insiders are not pure price recipients,and their trading behavior has varying degrees of abnormal returns in both short-term and long-term.The insiders can influence the company's stock price through their own trading behavior.The market will reassess the company's value based on the insiders' increasing and decreasing holdings.Extensive studies by domestic and foreign scholars on this phenomenon have shown rich results,which scientifically combine the economic theory with the actual market reflection.The studies establish the theoretical system of the insider trading behavior research,revealing the information transmission mechanism of the insider trading,which not only enhance the external investors' understanding of the information about the stock price change,but also provide a useful reference for the policy making of relevant regulatory authorities.Compared with developed countries,China's capital market started relatively late,and the legal system for information disclosure and enforcement is under continuous improvement.The special stock market structure,which is dominated by medium and small investors,also enhances the operability of insider trading using information superiority.Therefore,in view of the special structure of China's stock market,this paper combines the previous research results on the insider trading to examine the information content disclosed by the insiders' increasing and decreasing holdings based on the stock market regime.First of all,this paper systematically sorts out existing research results,and clearly shows the relationship between the insiders' increasing and decreasing holdings and the abnormal returns and information transfer in different academic achievements.Secondly,in order to investigate the difference of the information content of insiders' increasing and decreasing holdings in different market regimes,this paper divides the stock market into three regimes using the Markov switching vector autoregressive model.Regarding the stock market regime as the conditional variable,this paper applies the event study method to determine the internal market changes before and after the insiders' increasing and decreasing holdings announcements under different market regimes.Finally,this paper analyzes the information conveyed by the insiders' behavior to summarize the investment guidance and regulatory direction of the insiders trading.The empirical results show that the abnormal returns of insider trade do show differences based on the stock market regime.The increasing holdings of insiders in the bear market,the decreasing holdings in concussion market and bear market all can get abnormal returns,which have a negative correlation with the company size.But in the other market regimes are not the cases.Therefore,in the face of China's special stock market structures,investors should enhance their sensitivity to announcements of insiders' increasing and decreasing holdings and incorporate the information transmitted into the investment analysis system as a reference index to continuously improve their investment decision-making capabilities.Meanwhile,investors should be careful not to blindly follow the insiders' investments to avoid losses.Regulators should also increase the transaction costs of illegal operations by insiders and safeguard the interests of small and medium-sized investors.