The Price impact of director trading and announcements: evidence from the Australian Securities Exchange

Angelo Aspris, Alex Frino, Grace Gong

Research output: Chapter in Book/Report/Conference proceedingConference proceeding contributionpeer-review

Abstract

This study examines the price behaviour surrounding both director trades, and associated market announcements, for the Australian market. Using a sample of director trades executed between 2005 and 2010, results indicate that directors exhibit significant market timing, executing both their purchases and sales to make significant abnormal profits, while only purchases are associated with significant post-execution price movements. Announcements of director purchases have immediate and significant price impact, especially when the announcements relate to trades with possible information not already incorporated in the price; announcements of sales have minimal impact on stock prices. Further analysis reveals that the size of the director’s trade does not contain information, and that the majority of the price reactions associated with announcements are driven by more actively traded stocks. The magnitude of price movements between the director’s trade and subsequent announcement is the most important factor in determining the magnitude of the announcement effect. Our findings also suggest that the ASX requirements for reporting director trading are well justified, given that’s the main and first source of the information for the market. The results also indicate that the 5-day time frame is efficient in current Australian market conditions, although more strict market invigilating actions are be needed to eliminate existing late reporting.
Original languageEnglish
Title of host publicationPapers from the IV World Finance Conference
Pages1-34
Number of pages34
Publication statusPublished - 2013
Externally publishedYes
EventWorld Finance Conference (4th : 2013) - Limassol, Cyprus
Duration: 1 Jul 20133 Jul 2013

Conference

ConferenceWorld Finance Conference (4th : 2013)
CityLimassol, Cyprus
Period1/07/133/07/13

Keywords

  • director trading
  • price impact
  • information effects

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