In a recent case, the Securities and Exchange Commission (SEC) pursued an unconventional form of insider trading involving Medivation Inc., an oncology-focused biopharmaceutical firm and one of its former, senior executives. According to the SEC, the executive  profited from trading shares not of Medivation, but of another biopharmaceutical firm, based on his confidential information about Medivation as a merger target.

In a new study, we seek to better understand the informativeness of another form of unconventional insider trading and its role in the stock market. Specifically, we investigate whether directors or senior executives of industry peer firms (hereafter, peer insiders… Read more