Insider information in the stock market: speculative effect

Economic Annals-ХХI: Volume 152, Issue 7-8(1), Pages: 90-93

Citation information:
Matsuk, Z. (2015). Insider information in the stock market: speculative effect. Economic Annals-XXI, 7-8(1), 90-93. https://ea21journal.world/index.php/ea-v152-22/

Zoriana Matsuk
PhD (Economics),
Associate Professor,
Ivano-Frankivsk National Technical University of Oil and Gas
15 Karpatska Str., Ivano-Frankivsk, 76000, Ukraine
zoriana_01@yahoo.com

Insider information in the stock market: speculative effect

Abstract. Today, under the present conditions of integration of the stock market into the international financial space, the use of insider information in the market attracts special interest since it causes a biased market pricing and unfair competition resulting in financial losses for securities market participants and reduces the investing image of the country and stock issuing companies in general. The aim of the research is a theoretical study of speculative operations, assessment of insider information in Ukraine’s stock market, and identification of ways to improve the regulatory process of insider speculation. The study suggests that price speculation by using insider information is carried for profit and encourages increased liquidity of securities: the process of speculation affects increased liquidity for the asset of special interest, adjusts pricing relative to fundamental value and makes it possible to clearly track the actions of the participants after the disclosure of financial information. In order to improve the regulation of insiders’ actions in the market, the author suggests the need for insider reporting of all transactions to regulatory authorities. Thus, this information would be available to all market participants; it would be included in the information structure of market participants and could be used for qualitative analysis of information, which, in our opinion, would promote effective pricing, reduce the level of loss of market participants and increase yield of their operations.

Keywords: Insider; Information; Manipulation; Speculation; Stock Market

JEL Classification: E21; G12; G14; G19

References

1. Burmaka, M. (2011). Disclosure in the stock market in Ukraine: state and problems of development. Shkola profesiinoho bukhhaltera (School of Accountant), 6, 6-8 (in Ukr.).
2. Kovtun, V. (2014). Collective investment market financial intermediation. Rynok tsinnykh paperiv Ukrainy (Securities Market of Ukraine), 3-4, 69-72 (in Ukr.).
3. Leonov, D., & Prasolov, I. (2012). Dialectics dividend policy in an increasingly uncertain stock markets. Ekonomika Ukrainy (Economy of Ukraine), 7, 45-54 (in Ukr.).
4. Makohon, Yu. (2013). Prospects for innovation development of economy of Ukraine. Visnyk Kyivskoho natsionalnoho torhovelno-ekonomichnoho universytetu (Bulletin of Kyiv National Trade and Economic University), 6, 28-38 (in Ukr.).
5. Novytskyi, V. (2010). Globalization, new objects and subjects of study. Finansy Ukrainy (Finances of Ukraine), 10, 125-126 (in Ukr.).
6. Panchenko, Ye., & Shapoval, A. (2014). Foreign direct investment of Chinese multinationals: dynamics, structure and prospects. Rynok tsinnykh paperiv Ukrayiny (Securities Market of Ukraine), 11-12, 3-12 (in Ukr.).
7. Kuryliak, V., & Savelev, E. (2012). The impact of globalization on the economic development of Ukraine. Ekonomika Ukrainy (Economy of Ukraine), 9, 57-69 (in Ukr.).
8. Fedosov, V. & Stetsenko, B. (2014). Corporate Finance: problems and challenges of modern development. Rynok tsinnykh paperiv Ukrayiny (Securities market of Ukraine), 3-4, 79-80 (in Ukr.).
9. Snizhko, O. (2013). International competitiveness stock markets transformational economies under financial openness. Formuvannia rynkovykh vidnosyn v Ukraini (Formation of market relations in Ukraine), 2, 9-13 (in Ukr.).
10. U.S. Securities and Exchange Commission. Securities Exchange Act of 1934.
    Retrieved from https://www.sec.gov/about/laws/sea34.pdf
11. The European Securites and Markets Authority. Council directive 89/592/EEC of 13 November 1989 coordinating regulations on insider dealing.
    Retrieved from http://www.esma.europa.eu/system/files/Dir_89_592.PDF
12. Verkhovna Rada of Ukraine (2006). On securities and stock market (Law of Ukraine).
    Retrieved from http://zakon4.rada.gov.ua/laws/show/3480-15/print1390590693653120 (in Ukr.)
13. Peterson Mitchell, A. (2004). Information: Hard and Soft. Kellogg School of Management Northwestern University and NBER.
14. Glosten Lawrence, & Paul Milgrom (1985). Bid, Ask and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders. FIN. ECON, 14 J., 71.
15. Michaely Roni, & Kent L. Womack (1999). Conflict of Interest and the Credibility of Underwriter Analyst Recommendations. FIN. STUD., 12, 653.
16. Yang, Zh., & Yun Zhou, V. (2003). Insider Trading Activity Around Earnings Announcements: An Empirical Investigation. University of Wales, Aberystwyth, UK.
17. Wisniewski, T. P. (2004) Reexamination of the link between insider trading and price efficiency. Economic Systems, 28, 209-228.
18. Park, S., Jang, H. J., & Loeb, M. P. (1995) Insider Trading Activity Surrounding Annual Earnings Announcements. Journal of Business Finance and Accounting, 22(4), 587-614.
19. He J., & J. He (2001). Research Report: Essential Events Information Disclosure and Movement of Share Prices. Shenzhen Stock Exchange Research Department.
20. Soros, George (1994). The Alchemy of Finance. Wiley, NY.
21. Friedman, M (1953). Essays in Positive Economics. Chicago. Chicago University Press.
22. First Securities Trading System. (2008-2010). Information-analytical services «PFTS On-line»
    Retrieved from http://terminal.pfts.ua/sess.php?sp=ukr (in Ukr.)
23. Nelson, S. A (1964). The ABC of Stock Speculation. Fraser Publishing Company Edition.
24. Hamilton, William Peter (1998). The Stock Market Barometer. John Wiley & Sons Inc.

Received 13.05.2015