Decoding inside information
By: Lauren Cohen, Christopher Malloy, Lukasz Pomorski
Contributors: Malloy, Christopher; Pomorski, Lukasz; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16454; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16454.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] /
Description: "Using a simple empirical strategy, we decode the information in insider trades.  Exploiting the fact that insiders trade for a variety of reasons, we show that there is predictable, identifiable "routine" insider trading that is not informative for the future of firms.  Stripping away these routine trades, which comprise over half the entire universe of insider trades, leaves a set of information-rich "opportunistic" trades that contains all the predictive power in the insider trading universe.  A portfolio strategy that focuses solely on opportunistic insider trades yields value-weight abnormal returns of 82 basis points per month, while the abnormal returns associated with routine traders are essentially zero.  Further, opportunistic trades predict future news and events at a firm level, while routine trades do not"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 1/4/2011.

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