Some Insiders Are Indeed Smart Investors
Not all insiders are the same; some are more effective than others in processing the information they have access to, and invest their own wealth accordingly.
Author(s):
Research Associate, EDHEC Risk and Asset Management Research Centre
Managing Director & Head of Quantitative Equity Research,European Quantitative Equity Research, Citigroup
Vice President, European Quantitative Equity Research, CitigroupInvestment Research
We used a database with transactions from the U.K. market to identify insiders with superior market timing abilities. For the period 1994 to 2006 we showed that informative insider trades can be identified ex ante through certain characteristics of the transactions and the firm itself. Moreover, we showed how outsiders could benefit from this information. We created a long-only portfolio strategy that generated an economically and statistically significant return. In addition, we showed that the insider transactions' signal can be used to construct a satellite strategy that enhances the returns of a typical quant investment portfolio.
| Type: | Working paper |
|---|---|
| Date: | le 01/07/2008 |
| Research Cluster : | Finance |
See Also
About EDHEC
Operating from campuses in Lille, Nice, Paris, London and Singapore, EDHEC is one of the top 15 European business schools. Fully international and directly connected to the business world, EDHEC is a school for business, rather than a business school, where excellence in teaching and research focuses on innovation to stimulate entrepreneurship and creativity. EDHEC functions as a genuine laboratory of ideas and produces innovative solutions valued by businesses. The School’s teaching philosophy, inspired by its award-winning research activities, focuses on “learning by doing”.
