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Information Content of Insider Trading Volume: Evidence from Sri Lanka

Authors:

K. L. U. D. Perera,

University of Sri Jayewardenepura, LK
About K. L. U. D.
Department of Finance
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P. D. Nimal

University of Sri Jayewardenepura, LK
About P. D.
Department of Finance
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Abstract

This study examines whether high volume directors’ trading is more informative than low volume directors’ trading. It further examines the speed of adjustment of stock prices for the information content of high volume directors’ trading of the listed companies in the Colombo Stock Exchange (CSE). This study analyses a sample of high rupee-volume and percentage-volume directors’ purchases and sales reported to the CSE during September, 2004 to August, 2012 using the standard event study methodology. The findings on the high rupee-volume trading are consistent with the hypotheses that high rupee-volume directors’ purchases (sales) are associated with positive (negative) abnormal returns. Although the abnormal returns of percentage-volume directors’ sales are negative and significant, the high percentage-volume directors’ purchases are not significant. The findings on the speed of adjustment of stock prices on these information are not conclusive. I.e., the abnormal returns of high rupee-volume directors’ purchases are positive and significant on the event day and the abnormal returns of high rupee-volume and percentage-volume director’s sales are negative and significant but have been reflected in the stock prices with a delay suggesting that the adjustment of stock prices for director’s sales may not be quick in the CSE.
How to Cite: Perera, K.L.U.D. & Nimal, P.D., (2017). Information Content of Insider Trading Volume: Evidence from Sri Lanka. Colombo Business Journal. 8(2), pp.1–18. DOI: http://doi.org/10.4038/cbj.v8i2.15
Published on 29 Dec 2017.
Peer Reviewed

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