Insider trading footprints: An empirical look at detected cases in Australia

Abstract This paper examines illegal insider trading in Australian equity markets, focusing on whether such trades leave observable footprints in prices and returns. We compile a hand‐collected dataset of identified insider‐trading incidents. Using an event‐study design, we find minimal footprints for earnings announcements and a small negative price effect for M&A deals. A detection‐controlled estimation (DCE) model reveals that while 17.79% of M&A announcements likely involve insider trading, regulators detect only 29.59%. Thus, relying solely on detected trades understates insider trading's broader impact. Our results highlight stealthy trading tactics and the need for enhanced surveillance to combat hidden illegal trades.