Insider trading laws and stock price informativeness

Nuno Fernandes*, Miguel A. Ferreira

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

233 Citations (Scopus)


We investigate the relation between a country's first-time enforcement of insider trading laws and stock price informativeness using data from 48 countries over 1980-2003. Enforcement of insider trading laws improves price informativeness, as measured by firm-specific stock return variation, but this increase is concentrated in developed markets. In emerging market countries, price informativeness changes insignificantly after the enforcement, as the important contribution of insiders in impounding information into stock prices largely disappears. The enforcement does not achieve the goal of improving price informativeness in countries with poor legal institutions. It does turn some private information into public information, thereby reducing the cost of equity in emerging markets. (JEL G14, G38).
Original languageEnglish
Pages (from-to)1845-1887
Number of pages43
JournalReview of Financial Studies
Issue number5
Publication statusPublished - 2009


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