Does insider trading provide information in Thai market?

Abstract

There is much debate in the literatures whether insider trading is driven by opportunistic or liquidity trading. The study preliminary examines the information provided by insider trading in Thai capital market using the probability of information-based trading (PIN). It focuses on extending the traditional PIN model to examine the level of information asymmetry by various types of investors in the market (local retail, local institution, foreign, and broker investors). Using the data of insider trading from the 59-2 form provided by the Thai SEC during 2002 to 2008, the preliminary analysis finds that in general there is not much change in average PINs using Easley et al. (1996) estimation before and after insider trading, both for buy and sell transactions. However, using the extended PINs it is found that for the foreign investors PINs seem to increase (decrease) after buy (sell) transactions. This suggests that they are more informed after the insider buy transaction but become less informed after the sell transactions. In addition, it is documented that the portfolio of low PIN stocks that the insider buys outperform others over the next six months. This evidence is not consistent with the opportunistic insider trading since the low PIN firms are firms with less private information and as suggested by Chung et al. (2010) that these firms are firms with better governance structure.