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Insider trading by company directors and associates trading on the Australian Security Exchange (ASX) is rife, according to new research from The ANU.
And according to the findings, the practice is found across all industry groups.
Research - Company - Directors - Trades - News
The research studied company directors' trades made after good and bad news announcements over a 10-year period from 2005.
Study lead Dr. Dean Katselas said trading was contrary to the sentiment of the news; good news meant the directors sold their shares and if it was bad news, they bought.
Results - Trades - Knowledge - Company - Insiders
"My results show these contrary trades were being made with non-public knowledge, privy only to company insiders, about the future performance of the firm. This most certainly amounts to insider trading under the law," he said.
"It was the exact opposite of what you'd expect to see after either kind of news. If the news had the potential to boost the share price, I found the directors were selling their shares, when normally, this is the time you'd expect them to be buying."
Dr - Katselas - Cases - Insider - Trading
Dr. Katselas said cases of insider trading prosecuted by the Australian Securities and Investments Commission (ASIC), were predominantly made ahead of public pronouncements. Trading after financial news about a company had been made public meant insider trading could fly under the radar.
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