Investigating Insider Trading in Credit Default Swap Markets
Date
2011
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Haverford College. Department of Economics
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Thesis
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Award
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eng
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Open Access
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Abstract
Insider trading in credit default swap markets made possible by poor “Chinese walls” can be very detrimental to the efficient functioning of markets. This paper investigates the existence of insider trading leading up to, during, and following the 2008 financial crisis. Employing methods used by Acharya and Johnson (2007), we find evidence of insider trading in the nine months immediately following the start of the financial crisis for firms that have experienced credit deterioration or are expected to experience credit deterioration. However, we fail to find evidence of insider trading leading up to the financial crisis or once the fear and panic had subsided after the middle of 2009.