| Insider trading is one of the illegal behaviors in the global stock market.It not only seriously disturbs the order of capital market,making the stock price fluctuate abnormally and reducing the resource allocation efficiency,but also damages the interests of medium and small investors,thus weakening the attractiveness of the stock market.China’s securities market has made great progress since its establishment in 1990.However,the number of insider trading cases is increasing,which has become a crucial factor that restricts the healthy and rapid development of China’s capital market.Establishing an effective regulatory mechanism in advance,in the courts and afterwards,is essential for avoiding insider trading.Nevertheless,the complexity and concealment of insider trading make sit difficult for the supervisory department to distinguish insider trading effectively and accurately.In view of the complexity of insider trading behavior,this paper constructs the insider trading formation mechanism model from two perspectives: with manipulation and without maneuvering behavior,and makes description of the possible changing trend of stock price.Next,this article collects the insider trading cases published by China Securities Regulatory Commission(CSRC),and then adopts Variance Analysis Method,Mean Test and Event Study to analyze how insider trading affects stock price and market liquidity as well as the traders’ income.Finally,by selecting reasonable identification factors for insider trading behavior,this paper constructs the Logit model and determines the optimal cutoff according to the identification accuracy of insider trading.The conclusions of the study are as follows: Firstly,due to the different trading strategies,the insider trading cases happened in Shanghai and Shenzhen stock markets may either raise the stock price or lower the price.The volatility of stock price will be influenced by the value of inside information,the slope of traders’ demand curves,quantities of different kinds of traders and other factors.Secondly,insider trading,in most of the time,increases the market liquidity,whereas the effect will be much more significant when inside information is announced publicly,which indicates that most investors cannot be informed of inside information in advance.Thirdly,insider trading will bring excess return to the insiders.If operates appropriately,the average rate of excess return can reach as high as 24.07%.Fourthly,the recognition accuracy of insider trading behavior can be improved with access to the average rate of daily abnormal return,volatility of stock return and stock price information during insider trading,and the regulators can set optimal cutoff of insider trading recognition flexibly according to their actual demand. |
