Empirical Research On Abnormal Return Of Insiders’ Kinsfolk Trading

Insider trading has been a heated topic in both academic area and regulationauthorities for many years, but insiders’ kinsfolk trading, on the other hand, receivedmuch less attention.Based on the insiders’ kinsfolk trading data in May2007-May2012from ShenzhenStock Exchange public information, this paper did a series of empirical studies aboutthe abnormal return performance of insiders’ kinsfolk trading. In the event study, thepaper found that in view of trading direction, sell transactions have better timingability and profitability, and thus may contain more private information. In view oftype of kinsfolk, spouses&children groups, as have closer relationship and economicconnection with insiders, have better abnormal return performance. In view of tradingscale, large-scaled buy transaction and small-scaled sell transaction have better timingability and profitability respectively. In the factor analysis, the paper continued tostudy how factors in different horizons influenced the abnormal return performance.For both buy transactions and sell transactions, more centralized stock holding, valuestocks lead to higher level of abnormal return. Moreover, sell transaction is morelikely to take advantage of financial inside information. Besides that, the type ofcontrolling interest has significant influence on the abnormal return of selltransactions, but not of buy transactions.This paper is only an exploratory study, but is a good attempt to research into the areaof insiders’ kinsfolk trading, instead of traditional insider trading. How to regulate thebehavior of insiders’ kinsfolk trading is an important issue of both academiccommunity and regulatory agencies in the future.