Effects of Insider Trading on the Bong Market
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The bond market is affected by many of the same things the stock market is. When insiders trade stock of their own firm, Investors take this as a signal. Insiders are assumed to have an advantage by their position in the firm to know how well the price of the stock is going to do. Insiders are also assumed to take advantage of this information in trading for their account around the laws dictated by the Securities and Exchange Act of 1934. When significant news is going to be announced about a company, the stock price may begin changing prior to the announcement. This study examines the bond market to see if insiders make abnormal returns. It was found that there is some significant insider trading around the announcement date of insiders trading stock at the eight percent level for buyers and at the five percent level for sellers.