Insider trading may convey information to the market and promote accuratepricing of stocks. In this dissertation, I investigate insider trading at the turn of thecentury.In the first essay, I investigate insider trading activity in technology stocks duringthe high price - high volatility period of the late 1990s. I document that insiders oftechnology firms were heavy sellers during the ten month pre-peak period in which stockprices more than doubled. The technology stocks that were sold by insiders moreextensively in the pre-peak period had lower returns in the post-peak period. Ifurthermore investigate the relation between the net order flows (buyer initiated minusseller initiated trades) and abnormal insider trading activity. I document that the netorder flow is positively related to abnormal insider trading activity. However, thispositive relation becomes weaker in the peak period; which implies less price discoverythrough insider trading during the rise of technology stock prices.In the second essay, I document that disclosure requirements significantly affectinsider trading behavior. The Sarbanes-Oxley Act of 2002 requires expedited and on-line disclosure of insider transactions. This increase in the visibility of insider trading reducesinformational advantage of insiders and increases the likelihood of facing legal sanctionsfor insiders. I document that insider purchases significantly declined after the Sarbanes-Oxley Act. In addition, the incidences of insider purchases (sales) prior to positive(negative) earnings surprises declined after the Act. Finally, I document that the earningsannouncements become more informative after the Act, which is consistent with lessprice discovery through insider trading prior to earnings announcements. However, theevidence that the decline in insider trading contributes to more informative earningsannouncements is pronounced for insider purchases but not for insider sales.
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