Analysis Of Informed Trading With Dividend In A-share Market

As the continuous development of the global financial and economic environment, the securities market is playing an important role in the global economic growth. However, because of the inadequate disclosure of listed companies'material information, the investor-owned information was asymmetric. Driven by the profit cases that institutional investors use private information for information transactions are not rarely seen. Informed trading in the securities market not only affects the efficiency and fairness, but also causes loss to the individual investors.Informed trading phenomenon has caused a lot of attention of scholars home and abroad and a plenty of research appeared. A large number of studies in and out of China have confirmed the existence of informed trading. Studies based on the U.S. stock market have shown that in the U.S. market, institutional investors tend to use medium-sized transactions as the trading strategy while the study based on the Chinese A-share market for institutional investors'trading strategies is still blank.According to the Shanghai and Shenzhen A-share market latest high-freuency transaction data in 2009, take the 872 listed companies transaction data who have the dividend policy announced in 2008 annual reports as the sample, with the time opporunity of the announcement date, this paper does a comprehensive and systematic analysis on the informed trading status in A-share market in a variety of quantitative tools. First, this paper use the methods of return rate, event study and market model to study all the dividend announcement companies, stock dividend announcement companies and the cash dividend announcement companies and finds that in the Chinese A-share market the stock dividend announcement has a much greater impaction on the stock prices than the cash dividend announcement. And then by the cumulative average abnormal return method and the parameter analysis method, the study on the 221 stock dividend announcement companies shows that the informed trading does exist with the stimulation of dividend policy announcement and the institutional investors already take the abnormal actions before the announcement. The institutional investors are information owners. Furthermore, the abnormal behavior is more serious with a larger proportion of dividend policy. On this basis the price contribution method and the ANCOVA model are used in this paper to do the further research on the trading strategy of institutional investors. And then we draw the conclusion that in the Chinese A-share market, as a result of that the stock market regulation is not as strict as that in the USA etc. the insititutional traders tend to use the large-size trading strategy. They rely on the large-size transaction for promoting the stock price. Finally some advices in the stock market regulation are given out according to the informed trading.