Insider trading and shareholder investment horizons

Fu, Xudong; Kong, Lei; Tang, Tian; Yan, Xinyan

doi:10.1016/j.jcorpfin.2019.101508

Cited by 26 publications

(28 citation statements)

References 53 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…A simple example can be drawn by the sheer way shareholders define their investment horizons. On this topic and Fu et al, (2020) try to connect different holding horizons with insiders' performance. As such, several hypothesis have been discussed, some authors defend that short shareholder investment horizons can intensify the level of information asymmetry and therefore improve the insider traders position due to investors pressuring management for short term result (Harford et al, 2018;Graham et al, 2008;Fu et al, 2020).…”

Section: Literature Reviewmentioning

confidence: 99%

“…On this topic and Fu et al, (2020) try to connect different holding horizons with insiders' performance. As such, several hypothesis have been discussed, some authors defend that short shareholder investment horizons can intensify the level of information asymmetry and therefore improve the insider traders position due to investors pressuring management for short term result (Harford et al, 2018;Graham et al, 2008;Fu et al, 2020). Furthermore, it is also defended that, firms that have more long-term investors focusing on value tend to eliminate information asymmetry along time (Boone and White, 2015;Fu et al, 2020).…”

Section: Literature Reviewmentioning

confidence: 99%

“…As such, several hypothesis have been discussed, some authors defend that short shareholder investment horizons can intensify the level of information asymmetry and therefore improve the insider traders position due to investors pressuring management for short term result (Harford et al, 2018;Graham et al, 2008;Fu et al, 2020). Furthermore, it is also defended that, firms that have more long-term investors focusing on value tend to eliminate information asymmetry along time (Boone and White, 2015;Fu et al, 2020). Thus, based on the logical concept that more information asymmetry provides insiders with informational advantages, insiders will be able to use these advantages to maximize their profits (Kyle, 1985;Biggerstaffet al, 2020;Cline et al, 2017;Fu et al, 2020).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Furthermore, it is also defended that, firms that have more long-term investors focusing on value tend to eliminate information asymmetry along time (Boone and White, 2015;Fu et al, 2020). Thus, based on the logical concept that more information asymmetry provides insiders with informational advantages, insiders will be able to use these advantages to maximize their profits (Kyle, 1985;Biggerstaffet al, 2020;Cline et al, 2017;Fu et al, 2020). Moreover, this is correlated to an opportunistic trading behavior which are classified as more informed (Cohen et al, 2012;Fu et al, 2020) It is also fair to say that the level persistency of the informational advantage of insiders pays a crucial role on their adherence of long or short trading strategies.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Thus, based on the logical concept that more information asymmetry provides insiders with informational advantages, insiders will be able to use these advantages to maximize their profits (Kyle, 1985;Biggerstaffet al, 2020;Cline et al, 2017;Fu et al, 2020). Moreover, this is correlated to an opportunistic trading behavior which are classified as more informed (Cohen et al, 2012;Fu et al, 2020) It is also fair to say that the level persistency of the informational advantage of insiders pays a crucial role on their adherence of long or short trading strategies. Insiders will therefore opt by dilute their trading strategies when they are in the possession of more persistent informational advantages and opt for short term trading when their informational advantage is likely to vanish quickly.…”

Section: Literature Reviewmentioning

confidence: 99%

See 4 more Smart Citations

Is Insider Trading Successful? An Extensive Analysis With Buying and Selling Evidence

Santos¹,

Gama²

2021

Proceedings of the 15th Economics &Amp; Finance Conference, Prague

View full text Add to dashboard Cite

PurposeThe goal of the present study is to first, understand the market timing capabilities of a set of internal stakeholders while trading (buying and selling) stock, and second, shed some light on some of the characteristics that make them (or not) successful. Design/methodology/approachWe use a relative transaction price approach (RTP) on 842 aggregated trades coming from insiders. These were taken from publicly disclosed information available on the Portuguese regulator. Furthermore, we use a median regression-based method to infer on our conclusions. FindingsWe find that insiders buy (sell) at a relatively lower (higher) price when compared to other traders. This shows signs of market timing capabilities. Furthermore, from the studied characteristics, neither the frequency nor gender are good predictors for performance, but the seniority in the organization can help us to understand that some insiders, mostly on the managerial level, might have an edge. Overall, we also find that insiders' trades made OTC generally overperform the ones made on the open market. At last, we find that insiders did not lose any performance during the Portuguese bailout period.Originality/value By using a thorough analytical approach and a never-used sample of trading data, comprising both buying and selling trades at high-frequency (daily) level, we build on the literature of insider trading as well as on the knowledge around the effects of trading on the open market vs. OTC. We also make yet another contribute towards the literature around the Portuguese bailout effect.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

See 3 more Smart Citations

Is Insider Trading Successful? An Extensive Analysis With Buying and Selling Evidence

Santos¹,

Gama²

2021

Proceedings of the 15th Economics &Amp; Finance Conference, Prague

View full text Add to dashboard Cite

show abstract

Does feedback effect exist in firms' investment decisions? From the perspective of equity liquidity

2022

View full text Add to dashboard Cite

We explore the relationship between information asymmetries and firms' investment decisions. We find that severe information asymmetries can decrease firms' investment efficiency, especially increasing their over‐investments. In turn, firms' adjustments of their investment decisions towards the target can alleviate information asymmetry. Our results are not only in accordance with the signaling hypothesis, which states that firms' financial decisions carry information that is useful to the public, but also consistent with the feedback hypothesis, which states that outsiders can generate information that guides managers' decisions by trading stocks. Our findings have implications regarding both managers' incentives to be involved in inefficient investments and outsiders' ability to process information.

show abstract

Did Real Estate Professionals Anticipate the 2007-2008 Financial Crisis? Evidence from Insider Trading in the REITs

Shen

Hui

Fan

2020

J Real Estate Finan Econ

View full text Add to dashboard Cite

This research examines whether real estate professionals detected the property bubble and foresaw the consequent financial crisis of [2007][2008]. By analysing the insider trading activities within REITs from 1996 to 2010, we find that REIT insiders reduced their holdings significantly during the real estate boom period as early as 2004, before the financial crisis.Difference-in-difference analysis reveals that REIT insiders cashed out their positions more aggressively than insiders in real estate and construction firms. The findings support the informed trader hypothesis that managers and employees in REITs anticipated the burst of the real estate bubble and the imminent financial crisis, and shifted their wealth away from the real estate market to avoid potential losses. We find no evidence to support the biased belief hypothesis (Cheng et al., 2014) that REIT insiders were over-optimistic during the real estate boom period or that their inside trading behaviour was affected by local market performance.

show abstract

Insider trading and shareholder investment horizons

Cited by 26 publications

References 53 publications

Is Insider Trading Successful? An Extensive Analysis With Buying and Selling Evidence

Is Insider Trading Successful? An Extensive Analysis With Buying and Selling Evidence

Does feedback effect exist in firms' investment decisions? From the perspective of equity liquidity

Did Real Estate Professionals Anticipate the 2007-2008 Financial Crisis? Evidence from Insider Trading in the REITs

Contact Info

Product

Resources

About