The Exploitation of Inside Information at the Wall Street Journal: A Test of Strong Form Efficiency

Abstract

Abstract The study examines if tradings on stocks based on the inside information about the “Heard on the Street” column of the Wall Street Journal could generate abnormal returns. We found significant abnormal returns on days t =−1 and t= 0 (publication date) for the stocks related to insider trading. For a comparable control group of noninsider traded stocks, the abnormal returns were not significant on day t=−1 but were significant on day t= 0. The abnormal returns for the insider trade group on days t=−1 and t= 0 were greater than the returns for the control group. The results indicate that the inside information was the cause for the differences.

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