Insider Trading and Intraday Stock Price Behavior on the Tehran Stock Exchange

Document Type : Research Paper


1 Assistant Prof., Department of Economics, Factuly of Management and Economics, Sharif University of Technology, Tehran, Iran.

2 Department of Economics, Factuly of Management and Economics, Sharif University of Technology, Tehran, Iran.


Objective: We study intraday patterns of trading volume, size, return, and volatility using the Tehran Stock Exchange (TSE) high frequency data from 2008 to 2015.
Methods: We first document the intradaily patterns in stock returns, volatility, and trading value and volume. We subsequently examine the insider trading hypothesis by identifying the contribution of large, medium, and small order sizes to price changes.
Results: Our results indicate that trading value and volume follow a J-Shaped pattern, whereas absolute return exhibit an L-Shaped behavior. Our findings are consistent with the existing studies which document an increase in trading value and volume as well as absolute return. However, unlike the existing literature, we do not find a U-Shaped pattern in returns, and no statistically significant difference in returns is found throughout the trading hours. To examine the behavior of informed traders, we examine midsize trades and, consistent with the predictions of Barclay and Warner’s (1993) stealth-trading hypothesis, we find that they have higher price impact compared to other trade sizes. However, our findings do not support the intraday stealth trading pattern, as insiders prefer to trade in low and medium trade size to avoid revealing their information. This may be due to the low liquidity of the TSE.
Conclusion: Our findings are relevant for both policy-makers and traders. From the policy perspective, trading halts imposed by the regulatory body may have implications for trading behavior at the time of market open. Further, traders can use our findings to better understand the intra-daily behavior of the TSE and hence, execute large orders more efficiently.


Abhyankar, A., Ghosh, D., Levin, E., & Limmack, R. J. (1997). Bid-ask Spreads, Trading Volume and Volatility: Intra-day Evidence from the London Stock Exchange. Journal of Business Finance & Accounting, 24(3), 343–362.
Aboody, D., Hughes, J., & Liu, J. (2005). Earnings Quality, Insider Trading, and Cost of Capital. Journal of Accounting Research, 43(5), 651–673.
Admati, A. R., & Pfleiderer, P. (1988). A Theory of Intraday Patterns: Volume and Price Variability. The Review of Financial Studies, 1(1), 3–40.
Allahyari, A. (2008). To Study the weak from of efficiency of the capital market in Tehran Stock Exchange. Journal of Securities Exchange, 1(4), 75-108. (in Persian)
Badri, A., Arab Mazar, M., Soltanzali, M. (2016). Information Content of Limit Order Book in Tehran Stock Exchange. Journal of Investment Knowledge, 5(18), 95-117. (in Persian)
Baiman, S., & Verrecchia, R. E. (1996). The Relation among Capital Markets, Financial Disclosure, Production Efficiency, and Insider Trading. Journal of Accounting Research, 34(1), 1–22.
Barclay, M. J., & Warner, J. B. (1993). Stealth trading and volatility: Which trades move prices? Journal of Financial Economics, 34(3), 281–305.
Barclay, M. J., Litzenberger, R. H., & Warner, J. B. (1990). Private Information, Trading Volume, and Stock-Return Variances. The Review of Financial Studies, 3(2), 233–253.
Batten, J., Lucey, B., McGroarty, F., Peat, M., & Urquhart, A. (2017). Stylized facts of intraday precious metals. PloS one, 12(4), e0174232.
Bhattacharya, U., & Daouk, H. (2002). The World Price of Insider Trading. The Journal of Finance, 57(1), 75–108.
Blau, B. M., Van Ness, B. F., & Van Ness, R. A. (2009). Intraday stealth trading: which trades move prices during periods of high volume? Journal of Financial Research, 32, 1–21.
Bollerslev, T., Cai, J., & Song, F. M. (2000). Intraday periodicity, long memory volatility, and macroeconomic announcement effects in the US Treasury bond market. Journal of Empirical Finance, 7(1), 37–55.
Brock, W. A., & Kleidon, A. W. (1992). Periodic market closure and trading volume: A model of intraday bids and asks. Journal of Economic Dynamics and Control, 16(3), 451-489.
Brudney, V. (1979). Insiders, Outsiders, and Informational Advantages under the Federal Securities Laws. Harvard Law Review, 93(2), 322–376.
Carlton, D. W., & Fischel, D. R. (1983). The Regulation of Insider Trading. Stanford Law Review, 35(5), 857–895.
Carney, W. J. (1986). Signalling and causation in insider trading. Catholic University Law Review, 36, 863.
Chakravarty, S. (2001). Stealth-trading: Which traders’ trades move stock prices? Journal of Financial Economics, 61, 289–307.
Chan, K. C., Christie, W. G., & Schultz, P. H. (1995). Market Structure and the Intraday Pattern of Bid-Ask Spreads for NASDAQ Securities. The Journal of Business, 68(1), 35–60.
Chan, K., Chung, Y. P., & Johnson, H. (1995). The Intraday Behavior of Bid-Ask Spreads for NYSE Stocks and CBOE Options. Journal of Financial and Quantitative Analysis, 30(3), 329–346.
Chang, R. P., Fukuda, T., Rhee, S. G., & Taakano, M. (1993). Intraday and interday behavior of the TOPIX. Pacific-Basin Finance Journal, 1(1), 67–95.
Cheung, Y.-L., Ho, R. Y., Pope, P., & Draper, P. (1994). Intraday stock return volatility: The Hong Kong evidence. Pacific-Basin Finance Journal, 2(2–3), 261–276.
Collin‐Dufresne, P., & Fos, V. (2016). Insider Trading, Stochastic Liquidity, and Equilibrium Prices. Econometrica, 84, 1441-1475.
Copeland, L., & Jones, S. (2002). Intradaily patterns in the korean index futures market. Asian Economic Journal, 16(2), 153–174.
Cornell, B., & Sirri, E. R. (1992). The Reaction of Investors and Stock Prices to Insider Trading. The Journal of Finance, 47(3), 1031–1059.
Cyree, K. B., & Winters, D. B. (2001). An Intraday Examination of the Federal Funds Market: Implications for the Theories of the Reverse-J Pattern. The Journal of Business, 74(4), 535–556.
Danyalidehhoz, M., & Mansoori, H. (2013). Investigating Weak Form of Efficiency in Tehran Stock Exchange and Ranking Factors that Affect it. Economics Research, 12(47), 71-96. (in Persian)
Easterbrook, F. H. (1985). Insider trading as an agency problem. Principals and Agents: The Structure of Business. in Principals and Agents: The Structure of Business, John W. Pratt & Richard Zeckhauser eds. Harvard Business School Press.
Eross, A., McGroarty, F., Urquhart, A., & Wolfe, S. (2019). The intraday dynamics of bitcoin. Research in International Business and Finance, 49, 71-81.
Fallahpour, S., & Hakimian, H. (2019). Paired Trading Strategy Optimization Using the Reinforcement Learning Method: Intraday Data of Tehran Stock Exchange. Financial Research Journal, 21(1), 19- 34. (in Persian)
Farid, D., Burdbar, G., Mansoori, H. (2009). Identifying and Evaluating Weak-Form Efficiency Barriers of Tehran Stock Exchange Using BSC and MADM Techniques. Journal of Iran's Economic Essays, 6(11), 157-194. (in Persian)
Fishman, M. J., & Hagerty, K. M. (1992). Insider Trading and the Efficiency of Stock Prices. The RAND Journal of Economics, 23(1), 106–122.
Foster, F. D., & Viswanathan, S. (1993), Variations in Trading Volume, Return Volatility, and Trading Costs: Evidence on Recent Price Formation Models, The Journal of Finance, 48, 187–211.
Fox, M. B., Glosten, L. R., & Rauterberg, G. V. (2017). Informed trading and its regulation. The Journal of Corporation Law, 43(4), 817-898.
French, K. R., & Roll, R. (1986). Stock return variances: The arrival of information and the reaction of traders. Journal of Financial Economics, 17(1), 5–26.
Gerety, M. S., & Mulherin, J. H (1992). Trading Halts and Market Activity: An Analysis of Volume at the Open and the Close. The Journal of Finance, 47(5), 1765–1784.
Ghysels, E. (2000). Some Econometric Recipes for High-Frequency Data Cooking. Journal of Business & Economic Statistics, 18(2), 154–163.
Glosten, L. R. (1989). Insider Trading, Liquidity, and the Role of the Monopolist Specialist. The Journal of Business, 62(2), 211–235.
Goodhart, C. A. E., & O’Hara, M. (1997). High frequency data in financial markets: Issues and applications. Journal of Empirical Finance, 4(2–3), 73–114.
Gu, G.-F., Chen, W., & Zhou, W.-X. (2007). Quantifying bid-ask spreads in the Chinese stock market using limit-order book data. The European Physical Journal B, 57(1), 81–87.
Haddock, D. D., & Macey, J. R. (1985). Coasian model of insider trading. Northwestern University Law Review, 80(6), 1449-1472.
Harris, L. (1986). A transaction data study of weekly and intradaily patterns in stock returns. Journal of Financial Economics, 16(1), 99–117.
Hartmann, P., Manna, M., & Manzanares, A. (2001). The microstructure of the euro money market. Journal of International Money and Finance, 20(6), 895–948.
Hong, G., & Warga, A. (2000). An Empirical Study of Bond Market Transactions. Financial Analysts Journal, 56(2), 32–46.
Huang, R. D. (2002). The Quality of ECN and Nasdaq Market Maker Quotes. The Journal of Finance, 57, 1285–1319.
Hvidkjær, S., Massa, M., & Rzeznik, A. (2018). Informed Trading and Co-Illiquidity. Available in:
Jaffe, J. F. (1974). Special Information and Insider Trading. The Journal of Business, 47(3), 410–428.
Jain, P. C., & Joh, G.-H. (1988). The dependence between hourly prices and trading volume. Journal of Financial and Quantitative Analysis, 23(3), 269–283.
Karimi, A. (2017). Intraday stock price and insider trading pattern on the Tehran Stock Exchange. M.Sc. thesis. Sharif University of Technology. (in Persian)
Karpoff, J. (1987). The Relation between Price Changes and Trading Volume: A Survey. The Journal of Financial and Quantitative Analysis, 22(1), 109-126.
Kobari, M., Fadaeinejad, M., Asadi, G., Hamidizadeh, M. (2016). Herd Behavioral in Tehran Stock Exchange Based on Market Microstructure (case study: Mokhaberat Company). Financial Research Journal, 18(3), 519-540. (in Persian)
Köksal, B. (2012). An analysis of intraday patterns and liquidity on the Istanbul stock exchange.Working Papers 1226, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
Kyle, A. S. (1985). Continuous Auctions and Insider Trading. Econometrica, 53(6), 1315–1335.
Lee, C. M. C., Mucklow, B., & Ready, M. J. (1993). Spreads, Depths, and the Impact of Earnings Information: An Intraday Analysis. The Review of Financial Studies, 6(2), 345–374.
Leland, H. E. (1992). Insider Trading: Should It Be Prohibited? Journal of Political Economy, 100(4), 859–887.
Manove, M. (1989). The Harm From Insider Trading and Informed Speculation. The Quarterly Journal of Economics, 104(4), 823–845.
McInish, T. H., & Wood, R. A. (1990). An analysis of transactions data for the Toronto Stock Exchange: Return patterns and end-of-the-day effect. Journal of Banking & Finance, 14(2–3), 441–458.
Mehrara, M., Soheyli Ahmadi, H. (2018). Arrival Dynamics of Informed and Uninformed Traders into Tehran Stock Exchange. Financial Research Journal, 20(3), 265-288. 
(in Persian)
Meulbroek, L. K. (1992). An Empirical Analysis of Illegal Insider Trading. The Journal of Finance, 47(5), 1661–1699.
Noorbakhsh, A., Asgari, G., Nasiri, R. (2011). A Survey of Market Efficiency in Tehran Stock Exchange (TSE). The Iranian Accounting and Auditing Review, 17(62), 103-218. 
(in Persian)
Paital, R. R., & Sharma, N. K. (2016). Bid-Ask Spreads, Trading Volume and Return Volatility: Intraday Evidence from Indian Stock Market. Eurasian Journal of Economics and Finance, 4(1), 24–40.
Petersen, M. A. (2009). Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches, The Review of Financial Studies, 22, 435–480.
Raei, R., Mohammadi, S., Eyvazlu, R. (2013). Estimating Probability of Private Information Based Trade Using Microstructure Model. Financial Research Journal, 15(1), 17-28.
(in Persian)
Raei, R., Eyvazlu, R., Mohammadi, S. (2013). Survey on Information Risk using Microstructure Models. The Journal of Management Research in Iran, 17(3), 71-85. (in Persian)
Rahimian, S. (2016). Liquidity in Iranian Stock Market, Predicting Market Depth Using Intraday Data. Journal of Risk modeling and Financial Engineering, 1(1), 97-113. 
(in Persian)
Schotland, R. A. (1967). Unsafe at Any Price: A Reply to Manne, Insider Trading and the Stock Market. Virginia Law Review, 53(7), 1425–1478.
Seyhun, H. N. (1992). The Effectiveness of the Insider-Trading Sanctions. The Journal of Law and Economics, 35(1), 149–182.
Sheikh, A. M., & Ronn, E. I. (1994). A Characterization of the Daily and Intraday Behavior of Returns on Options. The Journal of Finance, 49(2), 557–579.
Tian, G. G., & Guo, M. (2007). Interday and intraday volatility: Additional evidence from the Shanghai Stock Exchange. Review of Quantitative Finance and Accounting, 28(3), 287–306.
Tissaoui, K. (2012). The intraday pattern of trading activity, return volatility and liquidity: Evidence from the emerging Tunisian stock exchange. International Journal of Economics and Finance, 4(5), 156.
Tsay, R. S. (2010). High-Frequency Data Analysis and Market Microstructure. In Analysis of Financial Time Series (pp. 231–285). John Wiley & Sons, Inc.
Wang, G. H. K., Michalski, R. J., Jordan, J. V, & Moriarty, E. J. (1994). An intraday analysis of Bid-Ask spreads and price volatility in the S&P 500 index futures market. Journal of Futures Markets, 14(7), 837–859.
Wood, R. A., McInish, T. H., & Ord, J. K. (1985). An Investigation of Transactions Data for NYSE Stocks. The Journal of Finance, 40(3), 723–739.
Zhou, B. (1996). High-Frequency Data and Volatility in Foreign-Exchange Rates. Journal of Business & Economic Statistics, 14(1), 45–52.