Corporate usage of financial derivatives, information asymmetry and insider trading

H Nguyen, Robert Faff, Allan Hodgson

Research output: Contribution to journalArticle

6 Citations (Scopus)


This article investigates whether financial derivative usage by Australian corporations constitutes information asymmetry when proxied by profitable trading in the firms' securities by insiders. The findings show that insiders who trade in companies that employ derivatives make larger purchase returns compared to insiders in nonuser firms with regard to trading identity, trading intensity, variability of usage, volume of trading, and industry effects. A plausible explanation is that asymmetry is driven by derivative traders who undertake noisy transactions in firms where risk outcomes were previously transparent. Excess returns are confined to purchase transactions consistent with insiders primarily selling for noninformation reasons.
Original languageEnglish
Pages (from-to)25-47
Number of pages23
JournalJournal of Futures Markets
Issue number1
Publication statusPublished - Jan 2010


  • insider trading
  • information asymmetry
  • financial derivatives

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