An Investigation of Returns to Insider Transactions: Evidence from the Istanbul Stock Exchange

Abstract

In this paper, the return performance of insiders of companies listed on the Istanbul Stock Exchange (ISE) from their open market transactions and that of uninformed investors (outsiders) following insider transactions announced to the public are examined by using a portfolio approach. It is found that, depending on the affiliation of the insider with the company, abnormal returns from their sale transactions last over longer periods than their purchase transactions. Furthermore, outsiders can also earn abnormal returns by mimicking sales of affiliated shareholders of a company. Findings of this study imply that the ISE is neither Semi Strong nor Strong Form Efficient.

Committees of Boards: An Event Study on an Emerging Market

“…Majority of the studies that conduct event studies for Turkish capital markets employ models such as the capital asset pricing model or the simple market model, as well as market adjusted returns. On the other hand, Tahaoglu and Guner (2011) employ the 3FM. In this study we employ the 4FM in order to estimate expected returns.…”

Who Are the Market Beaters: Lucky Investors, Insiders or Who Else

“…Del Brio et al (2002) investigate the trading profits of insiders in the Spanish stock market and they find that the strong form of the EMH does not hold, since insiders earn returns that exceed risk-adjusted benchmarks. Additionally, Tahaoglu and Guner (2011) examine the return performance of insiders of companies listed on the Istanbul Stock Exchange (ISE) and their results imply that the ISE does not provide the strong form of efficiency.…”

“…This form of efficiency investigates whether investors can earn abnormal profits by trading on private information. Testing for strong form of efficiency focuses on the groups of insiders whether any private information can be used to generate abnormal returns (Chaudhuri, 1991;Del Brio, Miguel, & Perote, 2002;Tahaoglu & Guner, 2011).…”

An Overview of Insider Trading in Borsa Istanbul

“…Due to the data scarcity, there are few early period studies (prior to 2009) exploring insider trading in Turkey. To the best of our knowledge, studies done by Kurtay (2009), Dogu, Karacaer, and Karan (2010), and Tahaoglu and Guner (2010) are the only studies that provide evidence for the existence and profitability of insider trading activities in Turkey. All these studies are exploring insider trading prior to 2009.…”