Does Insider Trading Have Cross-Market Spillover Effect? Evidence from Chinese Stock Market and Stock Index Futures Market

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Journal of Central University of Finance & Economics ›› 2018, Vol. 0 ›› Issue (3) : 39-50.

LI Meng-yu, WEI Xi-ye

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Abstract

Based on the information spillover effect theory, this paper analyzes the spillover effect of insider trading on stock index futures market by using mediation effect model. The empirical results show that aggregate insider trading can significantly predict future market returns of stock market and the stock index futures market. Moreover, the spillover effect on the futures market is mediated by the stock market. Further studies find that the spillover effects of insider buying and selling are asymmetric, and the latter has more information and greater impact on the futures market. Besides, the ownership structure of listed companies affects the spillover effect of insider trading. Insider trading of private-owned enterprises has higher interpretation ability on future excess returns of markets comparing to that of state-owned enterprises. This research not only extends the research perspective and provides evidence of cross-market spillover effect of insider trading, but also proposes recommendations on supervising share selling of major shareholders in China.

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Insider trading / Stock index futures / Spillover effect

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LI Meng-yu, WEI Xi-ye. Does Insider Trading Have Cross-Market Spillover Effect? Evidence from Chinese Stock Market and Stock Index Futures Market[J]. Journal of Central University of Finance & Economics, 2018, 0(3): 39-50

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