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The Impact Of Insider Trading On Market Liquidity In The Nasdaq Market, Walayet A. Khan, H. Kent Baker, Mukesh Chaudhry, Suneel K. Maheshwari
The Impact Of Insider Trading On Market Liquidity In The Nasdaq Market, Walayet A. Khan, H. Kent Baker, Mukesh Chaudhry, Suneel K. Maheshwari
Accounting Faculty Research
This study examines the relationship between insider trading and market liquidity (spread and depth) of NASDAQ-100 stocks. Tests on an intraday sample of sell trades show no evidence of cross-sectional association between the width of the spread and insider trading, but detect some widening of the spread after the fact. Overall, our results provide mixed evidence on the ability of NASDAQ dealers to unravel informed order flow and adjust spreads accordingly. Their short-term behavior suggests an inability to detect insider trading and widen spreads, but their behavior over time suggests that dealers may attempt to recover what they apparently lose …