December - 2018
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Igor Lončarski

Igor Lončarski

is an associate professor of Finance at the Faculty of Economics, University of Ljubljana. He holds a PhD degree from Tilburg University. Igor has published papers in Journal of Business Ethics, Financial Management, Financial Analysts Journal and International Review of Financial Analysis among others. He is the editor-in-chief of Risk Management, a member of the editorial board of the Journal of Behavioral and Experimental Finance, a subject editor of Journal of Multinational Financial Management and an associate editor of the Emerging Markets Review and International Review of Financial Analysis. Igor’s current research interests and projects relate to credit risk and credit spreads in the current low interest environment, ethics and insider trading, a general application of textual (sentiment) analysis to finance, as well as multifactor asset pricing models.

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Jonathan A. Batten, Igor Loncarski, Peter G. Szilagyi: Strategic insider trading: Liquidity impacts

It is well known that opportunistic inside-traders can exploit their private information by trading specific financial contracts, such as options, to gain leveraged monetary benefits. However, the recent conviction of inside-traders Kamay and Hill, who used pre-release national statistics data, to profit in the Australian foreign exchange markets, demonstrates more complex, strategic decision making: while derivatives were used to leverage information, only certain information was actually traded; losses were generated to mask trading activities; and great care was exercised when placing trades to minimise potential losses from offsetting price information arising in other contemporaneous financial markets. Importantly, trading was undertaken during periods of high market liquidity to maximise insider-information advantages. These results are consistent with insiders acting strategically to maximise the value of their information, while also trying to minimise the risk of detection. These actions highlight the limitations to regulatory surveillance in over-the-counter (OTC) markets, while reinforcing the importance of regulatory measures that prevent, or discourage, insider-trading prior to trade execution.

Last modified: 2018.11.30.