Reply: Comments on “The use of statistical techniques in the interpretation and implementation of South African insider trading legislation”

Abstract

This is a response to critical comments by Van Der Honert & Barr (1997), reported in this volume, relating to an earlier paper (Botha 1995). Van Der Honert & Barr assert that two blemishes in the reasoning and the model need to be ‘...rigorously addressed and resolved’. This reply argues and submits that Van Der Honert & Ban have not only attributed an incorrect assumption to the reasoning in the original paper, but do not seem to have taken cognisance of a crucial study (Meulbrook 1992), cited in the original paper, the results of which form the basis of the actual stated assumption of the original paper. Furthermore, their comments in regard to some issues of evidence indicate a misplaced understanding of the functions, and practice and procedures of our criminal courts. Thus, the two aspects which form the basis of the criticism by Van Der Honert & Barr, are clearly not of such a nature that, in relation to the proposed event study technique, they would ‘ ...mitigate against it becoming a satisfactory tool in a court of law’, as Van Der Honert & Barr have attempted to claim.

Keywords:

• Insider trading
• abnormal returns
• unpublished price-sensitive information